Reforming the PHL tax system is a question of when, not if

The call for reforming the 19-year-old personal income and corporate income tax systems is getting noisier. Keeping the tax system in its present form might prove costly for the Philippine economy since it is out of sync with its Association of Southeast Asian Nations (ASEAN)-6 peers.

And with ASEAN integration, not only will the Philippines have the poorest public infrastructure among its ASEAN-6 peers; it, too,will have the most uninviting tax system in the ASEAN region.

Will President Benigno S. C. Aquino III use what remains of his political capital to reform the 19-year-old Philippine tax system?

Most likely not. Mr. Aquino quickly doused any hope that measures that seek to reform the personal and income tax systems would pass. He echoed the Department of Finance’s (DoF) argument that a cut in personal income tax rates and corporate tax rate without corresponding adjustment in other taxes will result in investment downgrade by international rating agencies.

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Binay and the duty to ask tough questions

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Vice President Jejomar Binay, Sr. Photo from

Asking tough questions should challenge presidential aspirants to go beyond bullet points of beautiful things

“E di meron,” was the student’s curt response after Vice President Jejomar Binay was left with no choice but to admit that informal settlers – “about 3 or 5 percent” – continue to live in Makati.

This encounter happened a week ago when the Vice President took part at the University of the Philippines-Los Baños’s (UPLB) forum on governance and transparency. Students and faculty engaged in a candid conversation with the man who wants to become president. The forum covered a range of issues including dynasties, corruption and extra-judicial killings.

Forums like this breathe life into a toxic political environment. Thus far, the pre-campaign season has been defined by tasteless political point scoring – from exchanges of charots and chakas to ambiguous and almost meaningless statements of presidential contenders in carefully staged events.

This is why UPLB’s town hall-style forum was an occasion that must not be taken for granted. The forum illustrated the power of citizens to redefine the quality of political conversations. It set the standard on how precise presidential aspirants should be when making claims. It showed how a vigilant audience can enforce accountability–fudging answers will be called out, evading responsibility will be booed.

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A broad-based, comprehensive tax reform is the only way forward

The core elements of a broad-based, comprehensive tax reform program are lower income and corporate income tax rates, broader corporate tax base by rationalizing fiscal incentives, higher value-added tax rates, and higher real property tax.

Both the chairmen of the Senate and the House of Representatives Ways and Means Committee, Senator Juan Edgardo M. Angara and Congressman Romero Federico S. Quimbo, respectively, are right: the Philippine personal income tax system is archaic and needs to be reformed.

The present personal and corporate income tax systems have not been adjusted since almost two decades ago. With inflation-creep, the personal income tax system has collected from workers more taxes than what was originally planned.

Compared to its Association of Southeast Asian Nations neighbors, the Philippines’ personal income and corporate tax system continue to be the highest.

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How the Left Won in Latin America

The commentary “Why not a presidential candidate from the Left?” by Eduardo C. Tadem (Opinion, 8/7/15) elicited responses ranging from outright cynicism to guarded inspiration. But it was widely shared in the social media, suggesting interest in a discussion of this possibility. Are there examples out there that could convince skeptics on this idea “whose time has come”? We only need to look at the other end of the Pacific Ocean and see how Left leaders from Argentina, Bolivia, Brazil, Chile, Ecuador, Paraguay, Nicaragua, Peru, Uruguay and Venezuela won power and captured the political imagination of nearly an entire continent.

Latin America shares many characteristics with the Philippines. Apart from once being part of the Iberian Empire, our shared experiences with brutal dictatorships, praetorian militaries, glaring socioeconomic inequalities, politically influential churches, neoliberal economic crises and undue interventions from the United States inexorably bind us to this region. But while formal democratic rule was restored in the 1980s in both places, the political trajectories and fortunes of Latin America and the Philippines unfortunately diverged in the last decade.

Latin America’s Left captured state power through democratic elections. How did it achieve these victories when it did not have the money, machinery, pedigree and state resources that many in the Philippine political class enjoy?

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Why Not a Presidential Candidate from the Left?

Fielding a presidential candidate from the Philippine Left may seem preposterous and foolhardy to many, but to others this is an idea whose time has come. The political and socioeconomic situation of the great majority of Filipinos calls for radical change, not piecemeal reforms. Decades of rule by an oligarchic elite have only magnified poverty and deepened inequality.

Contrary to the now-worn-out mantra of the Aquino administration, it is not corruption that causes poverty; rather, it is poverty that breeds corruption via a culture of patronage feasting on an impoverished people.

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