A lot has happened since August of this year on the Tax Reform issue.
We have seen how our legislators, particularly Cong. Miro Quimbo and Sen. Sonny Angara, pushed hard for their Tax Reform proposals on the adjustment of income tax brackets and the lowering of income tax rates. We also read about the House Leadership strongly backing them initially on the passage of such Tax Reform proposals.
Then, we heard the President reject outright the calls for Tax Reform by echoing the arguments of the DOF and the BIR, particularly on the budget deficit that will lead to a downgrade by credit rating agencies. In response, TMAP and 17 other broad-based organizations banded together and issued a Unity Statement in support of calls for Income Tax Reform.
After which, there was a meeting called by the President with Tax Reform champions Cong. Quimbo and Sen. Angara, wherein the President subsequently asked the DOF and BIR to re-study their proposals.
Suddenly, there was a glimmer of hope that finally, the President might actually listen and heed the call of his bosses.
But, just very recently, it was disconcerting to hear the House Speaker seemingly having a sudden change of heart by saying that there is no time anymore for the 16th Congress to pass the proposed tax reform measures.
So, where do we go from here?
There is no denying that everybody agrees that our country badly needs Tax Reform. Even the DOF and BIR oftentimes profess their support for a comprehensive and holistic Tax Reform. Unfortunately for us, this simply means that they agree to Tax Reform in the long-term (when they are no longer around) but, definitely, not now (under their term).
But then, we ask them, given that we are seeking a comprehensive and holistic Tax Reform -- WHY NOT START NOW?
To answer this, we have to first acknowledge three (3) Basic Truths on the issue of Tax Reform.
1) The Personal Income Tax (PIT) system is inherently unfair because of unadjusted tax brackets for the past 19 years.
There is no denying that taxpayers, particularly salaried workers, have long suffered from the issue of "bracket creep" due to failure of previous administrations to index the income tax table to the Consumer Price Index (CPI).
2) The BIR heavily relies on salaried workers for PIT collections. Self-employed and professionals contribute very little.
80% of PIT collections come from salaried workers. While the BIR has tried to run after self-employed and professionals with its shame campaign, it still has little success in expanding the tax base and generating more collections from them.
3) In this age of ASEAN Integration, our income tax system (both for personal and corporate) has lagged behind our ASEAN neighbors in terms of lower income tax rates.
Through the years, the staggered reduction of income tax rates has become part of the tax policy of our ASEAN neighbors. This has promoted tax competition within the region in order to attract foreign investment and stimulate the economy.
Given these three (3) Basic Truths, why do Tax Reform advocates, like me, push for Tax Reform NOW? Can we just not wait for the next Administration to come in?
First of all, Tax Reform advocates do NOT really expect all reform measures to be passed this year. That would be unrealistically impossible!
Secondly, Tax Reform advocates do support the need for comprehensive and holistic Tax Reform measures to ensure that, at the end of the day, we will have a more fair, progressive and simplified tax system. A reformed tax system will help ensure inclusive economic development for our country and people.
Lastly, Tax Reform measures which seek to address the issues of broadening of the tax base (through simplification of the tax system) and tax competition (through lowering of tax rates) can come along later. These measures do require further extensive study and discussion.
HOWEVER, the call for #TAXREFORMNOW is deemed urgent in addressing the issue of FAIRNESS, particularly in terms of indexing the tax brackets to inflation.
If we already know that there is inherent unfairness in the PIT system because of unadjusted tax brackets, why not act on it at the soonest by indexing them to inflation NOW? Why continue to perpetuate the unfair tax system and leave it up to the next Administration?
Also, the proposed adjustment in the tax brackets due to inflation will not change the existing PIT system. It will remain under "status quo," which is what the DOF and BIR wants until a comprehensive, holistic reform is made.
The only change is for the underlying tax bracket values in the income tax table. This is no different from what the BIR did under Commissioner Kim Jacinto-Henares at the start of PNoy's term, wherein the BIR adjusted for inflation the VAT-exempt threshold amount.
Under RR 16-2011 dated October 27, 2011, the BIR adjusted for inflation the value of goods and services considered exempt from VAT. The BIR updated the values just after 5 years -- i.e., from its 2005 values to its 2010 present values at that time. This resulted to reduced VAT collections for the Government AND the BIR did NOT make any fuss about the foregone revenues resulting from the higher VAT-exemption.
Why then does BIR not do the same in supporting proposals to adjust the tax brackets for individual taxpayers, which will benefit mostly low and middle-income salaried workers? Surely, 19 years of unadjusted values should have merited its attention and quick support.
#TAXREFORMNOW is not an unreasonable populist call, as some would like to paint it. It is not there just for "pogi" points of legislators who have been pushing for it right at the start of the 16th Congress, not just in time for this 2016 elections. It is a real response to the plea for justice and mercy on behalf of millions of salaried workers who have long been overtaxed in this inherently unfair tax system.
Having said this, the Tax Reform measure of indexing the tax brackets to restore fairness in the system could NOT simply wait anymore. Napapanahon na ang pagtatama ng sistema ng pagbubuwis. Hindi na ito puedeng ipagpaliban pa.
As the saying goes, "Justice delayed is justice denied."
And if our Government would knowingly chooses to ignore this plea, then rest assured that we, the salaried workers, will always remember this Administration for its grave sin of omission, especially this coming elections.
There is still time to pass a tax reform law, Mr. Speaker. Pag gusto, may paraan. Pag ayaw, maraming dahilan. You just need to enact into law the indexation of tax brackets. That is what is most important at this point. The other reforms can be handled by the 17th Congress, which hopefully will be more supportive and courageous in pushing for Tax Reform.
There is still time, Mr. President, to change your mind and heed the voice of your people. Let their cry not be drowned out by the usual rhetorics of the DOF and BIR, which prioritizes short-term revenue collections over long-term equity and growth. Let this single act of Tax Reform be your greatest legacy towards "Tuwid na Daan."
Fellow taxpayers, this Tax Reform advocacy presents to us a once-in-a-lifetime opportunity to realize meaningful changes in the Philippine tax system. It is NOT yet too late. If we let this chance pass us by, it will take at least another two (2) years before we get another crack at Tax Reform.
Let this be the time to make our voices heard -- #TAXREFORMNOW. May we all never ever give up!
