Conclusion
The Tax Reform for Acceleration and Inclusion (TRAIN) law, as everyone knows, reduced income-tax rates for individuals, even as it increased the rates imposed under the excise-tax system and rationalized the value-added tax (VAT) rules by expanding its coverage, evidently hoping to offset the revenue losses from one with the additional revenues from the other.
Sadly, the framers of the TRAIN law evidently didn’t take several facts into consideration. The first is that the reduced income-tax rates benefit only a small sector of the population; minimum-wage earners, who make up the lion’s share of employees and workers across the economic spectrum, have nothing to gain from these lower income-tax rates, precisely because they don’t pay income taxes at all and their wages won’t increase unless the government says so—and it doesn’t sound like any such increase is in the offing.
But because they’re consumers just like everyone else, they have to contend with escalating retail prices brought about by the new excise tax and VAT rates. I don’t think I’ve ever come across a more contentious situation. It is one thing to increase the rates for one particular type of indirect tax. But to increase the rates for two types of indirect taxes—VAT and excise taxes—which are imposed on so many goods and services, including many basic commodities is, to my mind, tempting the Fates.
All this just goes to show not only what a delicate balancing act the calibration of tax rates really is but that, perhaps, it is time that public finance policies took into account not just the figures generated by increasingly complicated equations and models but also the experiences of the working public, for whom the daily business of survival becomes more challenging with each passing day. Because the uncomfortable truth is that no economic model—no matter how complex—can truly predict the highs and lows of everyday life, and the consumption habits that go with it.
Technical expertise has its value, but the hard-earned wisdom of daily life is something that no one should ignore, underestimate or discount, especially in making decisions that will have a tremendous impact on millions of lives.
Before I sat down to type this column, I had a chat with a friend of mine from my hometown, who told me that his wife was becoming increasingly disturbed at the prices she was seeing on almost everything in the local grocery store, from ground beef to fruit juices to laundry soap. She couldn’t shake the feeling, he said, that the worst was yet to come, and I have to admit that I can see where she’s coming from. But my friend and his wife, at least, have the consolation of jobs that pay well enough for them to be able to put food on the table three times a day, with the occasional snacks and gastronomical indulgences in between. But what about the street sweeper, the taxi driver, the sales person and all those who work in jobs that pay no more than what the minimum wage law decrees?
The rains of the monsoon may have gone on hiatus for now, but I fear that when the next phase of the TRAIN law—a.k.a. Trabaho—trundles out of the government’s station, its cargo may not be the elements for economic development, but the ingredients for a perfect storm of a different kind.
Let’s hope the stationmasters realize this, before we all get caught up like sodden ducks in an economic tempest that not even Gene Kelly warbling “I’m Singin’ In The Rain” can get us through.
Anthony Alden Aguilar is on study leave from The Tax Offices of Romero Aguilar & Associates. He is a member of the Management Association of the Philippines National Issues Committee and MAP Task Force for Taxation.
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