AlDub and Philippine Tax Reform
By Dr. Pinky Intal · Originally published September 28, 2015. Rules and rates may have changed since then.
Well, don’t get me wrong, because I was part of that 12M and 25M who sent in tweets last two Saturdays of this month. I am also a part of the Aldubnation, in fact my whole clan is. But, come to think of it, there is also some truth to that particular tweet. What if, there are 25M tweets that will be sent about #LowerIncomeTaxPH. Would the government finally listen? Why am I telling you 25M?
Overtaxed Middle Class
According to a study conducted by former Secretary General Romulo Virola of the National Statistical Coordination Board, over 74.7% of the population comprise the lower class, while 0.1% families constitute the upper class, the remaining 25.2% fall within the “middle class” or the 4.7M families with 5 members. They are the group who is heavily taxed in the Philippines.
What is the Tax Implication?
The 74.7% (LOWER CLASS) of the population, which includes the minimum wage earners that does not need to pay income tax at all.
The 0.1% (UPPER CLASS) of the population has gained wealth from dividends or stock options. They have holding companies that enjoy bigger tax deductions than individual paying taxes.
Who is left now?
The 25.2% (MIDDLE CLASS) of the population. If we say middle class, they are families that are earning P328,000 to P4 M per year. Where you and I probably belongs. The heaviest taxed group.
Let me illustrate the tax impact to a middle class family in a story.
Alden and Maine are best friends since High school. Alden wanted to be a doctor, but Maine wanted to be a Teacher. In college, they parted ways to study their chosen courses. They both fulfilled their dreams and finally earned their degrees.
They met again, realizing they love each other more than friends, they decided to start a family, so they married. Maine, now a teacher earning 22,000/month and Alden who just started practicing as a surgeon earning 60,000/month. How much would be their tax here in the Philippines?
If you still do not know, the Philippines is one of the highest taxed country among ASEAN nations.
Now, let us take Alden and Maine to Singapore. Let’s assume they are earning the same (although that is impossible). How much is their tax now?
A Netizen recently caught my attention, when he says:
My Tax in Singapore for earning 1M pesos would only be 6,000 for the whole year. If I stay in the Philippines earning 20,000/month or 240,000/year, my tax would be 48,000 pesos.
Working in the Philippines is a scam, you are paying a premium for a very poor quality of service.
Now, Let us Compare
An extra 233,028/year or 19,419/month would be a lot of help to a middle income family:
- This could mean, they can now afford to buy a HOUSE with a monthly mortgage of 5,000-10,000/month, perhaps this could lower the informal settlers around the Philippines. There are some middle-income families are also informal settlers. Especially those earning 328,000/year with more than 5 family members.
- This could mean an EDUCATION PLAN that can be used to plan for their child’s education up to college, causing lesser drop-outs in school. Statistics tell us, out of 100 who enter elementary only 65 graduates, out of 65 only 43 graduates High school, from 43 who graduated High school only 23 enters college, from 23, only 12 will get the degree. (Philippine Human Development report, UNDP). How to get more than 50% discount for your child’s College Tuition fee
- This could mean they can start investing/saving for their RETIREMENT PLAN. According to a SSS survey, out of 100, only 2% of the population can retire comfortably and the remaining 98% depends on either: their family, charity or the government. The Filipino Retirement Scenario, Find Out Where will you Belong in the Future
- Contrary to what the government believes, this could mean MORE TAX COLLECTION for the government. Lower taxes could mean better compliance and greater purchasing power for an ordinary person like me and you. Greater VAT collection for the government. All goods, services and consumption are taxed with 12% VAT.
- This could mean more business money that could be put up. Making each of us ENTREPRENEURS thus creating more jobs to our fellow citizen thereby uplifting others in their situation too.
- This could mean more people buying LIFE INSURANCE and HEALTH INSURANCE, thereby, lessening Filipino independence to the corrupt government officials. In cases like a death of a family member or major sickness, people won’t go to a Politiko asking money “Pampalibing” or “Pampagamot”, which could even push these Politikos to corrupt practices, justifying their acts as what they get, they are given to people too.
Tax Reform
I’m not saying to have a tax bracket like that of Singapore now for the Philippines. I am just one of those people who want a reform, amend or revisit of our income tax system which remained unchanged since 1990's. Senator Angara says in an article in Inquirer- Overtaxing working Middle Classes, he said “I discovered that the percentage and tax brackets have remained unchanged since the 1990s.”
In 1990, when a Jeepney ride would just only cost you P1.25 vs P7.50 now, our income tax system remained unchanged.
A P12,000 /month would be a lot of money in 1990’s, but now? I don’t think so, yet, they are taxed the same.
Rich People = Rich Country
They say, GNP (Gross National Product) and GDP (Gross Domestic Product) will tell how rich the country is. But do you know that GNP and GDP are just the sum total of how rich the people are in the country? It measures how much each Filipino (all over the world) and those people (living here) earns in a particular year.
“It only means if the PEOPLE are rich, The COUNTRY is also RICH.”
There is no such thing as, making the country rich by making its people poor through over taxing.
Sa Tamang Panahon
Sec. Purisima and Commissioner Henares says it is not the right time to reform the income tax system. See article by Inquirer here.
But to those of us who says “Ouch!” and feels the hurt every time we pay taxes, and every time we look and ask: “Where are the taxes going?” Tax reform should have been done even earlier. I know there are also lawmakers already lobbying for tax reforms like tax reform proposals that have been put forward by Senator Juan Edgardo M. Angara (Senate Bill 2149), Senator Paolo Benigno A. Aquino IV (Senate Bill 1942), and Senator Ralph G. Recto (Senate Bill 716). I hope they won’t give up.
Philippines has approximately 100M population, 25% of that is 25M, if only we send in 25M tweets telling we want tax reform now or #LowerIncomeTaxPH, maybe, we will trend around the world. Just maybe, we will be finally be heard by the President, other law makers of the country, Department of Finance and BIR.
I’m not a famous person, my voice is just a small voice wanting to be heard, but, if all the small voices of the 25M like me speak up, I believe we will soon be heard. We have shown that we can break the world record of the most number of tweets sent in a day as an Aldubnation. Now, I challenge the whole nation not just the AlDubnation to speak up! I also challenge those voices louder than me that could step up and lead us to tweet altogether to hit 25M tweets with the hashtag: #LowerIncomeTaxPH.
Would the world finally listen? Would our government finally open its blind eye to us? Or would they just tell us again and again, “Sa Tamang Panahon?” (When would that be?)
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*Disclaimer: Income tax computations are Rough estimates and was based on the existing income tax brackets by PH and SG. Not all deductions and Contributions are factored in.
Read More:
- Part 1: What is Estate Tax and How it can hurt you even After Death?
- FILIPINO DOCTORS AND TAXATION Part 1: The Ultimate Guide on How to Register as a Doctor/Physician in BIR
- SSS Retirement Benefits, Updated 2014 Is it enough for your Retirement Needs? Find Out now!
- How to get more than 50% discount for your child’s College Tuition fee
- Top 10 Life Insurance Companies in the Philippines, Unbiased Review