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Tax-onomy

Speaking before the monthly meeting of the Foundation for Economic Freedom (FEF) last week, Finance Secretary Sonny Dominguez’s Powerpoint cover slide was pretty blunt: “No taxes, no infra!”

Which of course is just common sense to any ordinary housewife who has to make ends meet: No income, no outgo. You don’t need to be an economist to get that.

But some people are just plain stubborn. They’ll insist, for instance, that we can get by if only BIR and Customs worked harder and cleaner to collect more. These days, though, when both agencies are reportedly already clearing up to 90 percent of their collection targets, that approach will get us nowhere near the seven percent of GDP that Duterte wants to spend on infrastructure, double the current three-four percent.

It’s time to bite the bullet and pay up the additional taxes we’ll need to build more roads, bridges, ports, school buildings, and other infrastructure—not just to hit our goal of seven percent GDP growth every year, but more immediately to make up for the underspending that PNoy deliberately fostered throughout most of his term.

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Secretary Dominguez’s P800-billion tax reform package has been applauded by analysts and economists for its success in balancing the need for more revenues with the equally important need to maintain progressiveness , i.e. tax the rich disproportionately more. Phasing in the new taxes in three stages over the next two years also helps to ease the pain.

Unfortunately, the centerpiece of his program—new or higher fuel excise taxes, which will raise P120 billion in the first year alone—will also be the most contentious. Expect some congressmen to grandstand for their constituencies. And expect the Left to jump into the fray with pro-poor rhetoric that as usual misses the mark.

At today’s very low oil prices, the absolute amount of pain will be minimized. It’s actually an opportune time to restore the tax on diesel fuel (tax-exempt since 2005) and raise the tax on gasoline (taxed at only P 4.35 per liter over the last two decades).

Indexing the tax to inflation also allows the tax to keep pace with increases in the prices of whatever it is funding, whether infrastructure (e.g. rising cement and steel costs) or social services (e.g. higher prices of the basic commodities purchased by the poorest of our poor who subsist on cash transfers). But indexation will stop as soon as oil prices hit $100 a barrel, sparing us from both hyper-inflation and extreme oil price volatility.

The fuel tax burden will in fact fall disproportionately on the rich, who account for over half of transport fuel usage. The same tax paid by the rich guy who owns a diesel-powered SUV would be spread out among the 15 commuters who ride a jeepney or FX PUV with the same engine displacement.

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Proceeds from the new fuel tax will be used to fund, not just infrastructure, but also social services and worker productivity programs. Obviously the intent of the last one is to enable workers to increase their income over time and keep up with any inflation adjustments to the tax.

As for social services, a major beneficiary will be the DSWD’s conditional cash transfer (CCT) program, a legacy from the PGMA years. Program members will be receiving an additional P300 a month, even as another six-million members can now be added to the rolls.

As against the additional benefit of P3,600 a year, the DoF estimates that each CCT family will incur an additional financial burden of P 1,055 a year, both from the fuel taxes and from follow-on price increases in other commodities. In other words, there is actually a potential net gain of P 1,545 per year for the poorest of the poor among us!

Another, perhaps unintended, beneficiary of the fuel taxes may also be the environment, as well as Metro Manila’s Sisyphean traffic situation, as and when the number of privately owned vehicles goes down.

Apart from fuel, the government also wants to increase excise taxes on automobile sales, raising another P31.4 billion in the first year alone. Between both taxes, we may see a dampening in new automobile sales, which to date have persistently been rising year after year no matter what happens to the economy.

As both taxes in turn are used to fund the expansion and improvement of mass transit systems in Metro Manila, we may finally see a significant number of car owners leaving their vehicles at home. It ought to be a welcome break for that anonymous American lady upon whom so many Waze users have become so dependent.

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My upbeat closer for today is about US Court of Appeals Judge Neil Gorsuch, who’s been nominated by President Trump to take the Supreme Court seat vacated, fittingly enough, by the late Antonin Scalia, a conservative jurist of the first order.

Gorsuch’s credentials are sterling: Columbia, Harvard Law, and Oxford. He is an originalist who has defended religious freedom, favors a limited role for judges on constitutional issues, and is expected to vote against “innovations” like abortion and same-sex marriage.

Until laws like these are overturned, they remain Damocles’ swords hanging over countries like ours who may disagree with them, but who may be forced nonetheless to introduce similar policies on pain of losing financial aid and other American goodies.

Candidate Hillary was all set to do exactly that, had she won. Today our country is tilting away from the United States and the cultural morass its public commons has become. May we continue to be so preserved.

Readers can write me at gbolivar1952@yahoo.com.

Topics: Gary Olivar , Tax-onomy , Foundation for Economic Freedom , Finance Secretary Sonny Dominguez , gross domestic products , GDP growth , tax reform
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