The Duterte regime’s Tax Reform for Acceleration and Inclusivity (TRAIN) hits the country with tax cuts for the richest few and greater burden for the lower and middle-class households.
The law will lower the personal income tax of those who earn more than the minimum wage. Consequently, it imposes 12% Value Added Tax (VAT) to products such as local shipping, low-cost or socialized housing, and power transmission and cooperatives. There will also be new and additional excise tax for petroleum, automobile, and sugar-sweetened beverages (SSB).
REALLY? IN THIS ECONOMY?
“Despite the government’s propaganda that the poor will benefit the most from the law, it is the poor themselves who are clamoring against the incessant price increase of basic commodities,” said Chang Advincula, Anakbayan Metro Manila spokesperson.
Revenues from the tax reform of around P1.3 trillion are pegged to fund extravagant Build! Build! Build! Infrastructure Projects. This is played in a context where public funds are used to fuel wars against the people — the war against the poor through Oplan Tokhang, the war against Moros that caused the ruin of Marawi, and war against dissenters through government crackdown and Martial Law.
According to Ibon Foundation, most of the infrastructure projects are concentrated in business centers and highly urbanized areas, such as in NCR, Central Luzon, and Southern Tagalog. While regions with greater poverty incidence, such as CAR and ARMM, will only be given a small fraction of infrastructure funding. Projects include farm-to-market roads, bridges, flyovers, airports, and seaports — far from what our countrymen need now, which are schools, hospitals, mass housing, irrigation, and other basic services. Clearly, infrastructure projects under Build! Build! Build! are only beneficial to the rich bureaucrats and big businesses.
SHIFTING THE BURDEN TO THE POOREST HOUSEHOLDS
“‘Mahirap kayo? Putang ina, magtiis kayo sa hirap at gutom!’ With this resounding quote from the president himself comes the crowning of TRAIN as the worst tax reform in modern history,” said the youth leader.
The lowering of personal income tax does not benefit those who are already earning minimum wage or less, for even before the tax reform, they have already been exempted from paying it. While it is advantageous for the middle-class to have a lower personal income tax, it is unjust to lessen tax obligations of those who are earning hundreds of thousands, even millions of pesos every month.
Duterte’s TRAIN law is an affront to the working class and the poorest 21 million households in the country. Despite the government’s propaganda of easing up the lives of the lower and middle-class by increasing their take-home pay, the law aims to shift the burden of earning government revenue for pro-business infrastructure projects to the poor. In fact, there will be a total of P944 billion worth of lost revenue from the richest few from decreasing personal income tax and having flat rate estate and donor tax. The government income loss will be paid for by the lower and middle-class through added items covered by VAT, the excise tax for oil products, and extra levy from sugar-sweetened beverages and automobiles, which amount to P1.743 trillion.
“Heartless is a regime that aims to extort the poor billions of taxes to fund the very government policies that keep them drenched in poverty,” added Advincula.
U.S.-LED NEOLIBERAL AGENDA AT FULL PLAY
The TRAIN law is only one of the 471 economic policy recommendations under the Partnership for Growth (PFG), the most comprehensive U.S. intervention in policy-making in the country. Along with US government agencies such as the US Agency for International Development (USAID), Millennium Challenge Corporation (MCC), and the IMF-World Bank, the anti-poor tax reform is simply neoliberalism at full play.
The TRAIN law is much to the tune of Donald Trump’s impending tax cuts in America. Under House Republicans’ tax reform plan, the federal estate tax, a levy paid only by the wealthiest households, will be eliminated, and corporate tax rate will drop to 20% — all for the sake of increasing the profit of the richest percentile while shifting the burden of gaining revenue to lower and middle-class households.
The Duterte regime’s economic managers blatantly exhume TRAIN’s objective of lowering corporate income tax for the Philippines to be more “sexy” for Foreign Domestic Investments. This means molding our economic policies to attract big businesses to further exploit our resources for cheap raw materials and our fellow Filipinos for cheap labor and captive markets.
It must also be noted that the TRAIN law went top priority right after the conclusion of ASEAN and EA Summits and the first set of bilateral talks between Trump and Duterte.
Clearly, the TRAIN law aims to strengthen U.S. imperialist’s grip on the country’s already deteriorating economy to pave way for greater economic plunder and profit-generation.
THE NATIONAL DEMOCRATIC ALTERNATIVE
The only solution to the country’s worsening economic and political crises is a national democratic revolution with a socialist perspective. The Filipino people must abolish the domination of U.S. imperialism and its local cohorts on our economy. We must implement genuine land reform and a comprehensive national industrialization program that will pave way for an independent and self-sustaining economy which in turn will benefit the majority of the Filipino people.
National industrialization will break the country’s currently export-oriented extraction of raw materials and production of cash crops and import-dependence on processed materials. By advancing agriculture through land reform, huge amounts of agricultural surplus that are currently being hauled out by feudal lords and compradors will be utilized to support the industry’s needs. The development of agricultural practices will result in more bountiful harvests and better-quality yields for the people’s food consumption and the local industries’ raw material requisites. By uplifting the countryside where the majority of the people reside, we will be solving the issue of urban congestion and lack of sustainable jobs.
Only then will we be able to craft a pro-people monetary and fiscal policy, which does not put the people against each other — a system of earning revenue that does not perpetuate inequity.
In the short run, the government should abolish the TRAIN law and implement instead a progressive tax system that increases tax obligations of the richest few and lessens indirect taxes such as VAT and other taxes from consumer goods. According to Ibon, there is P409 billion worth of uncollected corporate income tax. The country’s richest 40 individuals own a total wealth of P3.7 trillion. In fact, if we put a 20% and 10% increase in the income tax of the richest 0.7% and 0.8% respectively, the government can earn at least P90 billion worth of revenue — an already huge amount given it is only the richest 1.5% that we have put as an example.
“The youth should unite and wield their strength to resist, isolate, and overthrow the fascist U.S.-Duterte regime! The TRAIN law will only worsen social inequality and widen the gap between the rich and the poor. Duterte’s tax reform will exacerbate class contradiction, building bases for the masses to take up arms and wage war against imperialism, bureaucrat capitalism, and feudalism — only then will genuine change come to fore,” ended Advincula.