TURNING POINT: A Train that Needs Derailing

NAAWAN, Misamis Oriental (MindaNews / 20 January) — Taxes are the lifeblood of government. Taxes have to be reformed or adjusted now and then to respond to the needs of the times. President Duterte should not be condemned in breaking one of his election  promises, that is, not to raise new taxes: Only the gullible and stupid believe that it is possible. It was an attractive elections lure though that worked and helped catapult him to victory.

The much touted benefits of the Tax Reform for Acceleration and Inclusion (TRAIN) law, particularly the increase, accordingly, of the worker’s take home pay resulting from a lowered personal tax, are tragically offset by the imposition of excise tax on imported fossil fuel. This excise tax impoverishes the poor further down but skyrockets the wealth of big business or those who control the  industry.

How this would happen, let’s look at diesel fuel. The cost of crude oil is affected by world demand and the value of the dollar over our the peso. Whatever is the cost which incidentally is always often on the rise, will ultimately be passed  from refineries to the gas stations and ultimately to the riding public. The acquisition cost, plus the cost of transport are likewise passed on to manufacturing plants, say, those that produce farm inputs, like fertilizers and pesticides, and feeds for farmed animals (hogs and poultry). The farmer logically passes all the production cost of his produce to the comprador (bulk buyer) which ultimately transfers it, plus the cost of transport, to the market vendor.  The vendor dumps everything to the distraught housewife who is at the end of the line.

The same thing happens to manufactured goods. The cost of tin and other packaging and raw or component materials are added to the price of the finished product and always those at the end of the line suffer the brunt of the passing game.

Those, however, who hold the capital and run the country’s industry are hardly disturbed no matter the taxes imposed on them because of the expedient passing game. They will continue to rake profits and increase their wealth.

Excise tax and its chain effects  are a form of indirect taxation. It is regressive, taxing equally the low and the high income earners. This manifests when they purchase basic commodities.

The prices of basic commodities are blind and do not discriminate the buyers. It’s constant for the family or individual regardless of incomes. For instance, when a jeepney  driver who earns P800/day and a bank manager who gets P3,000/day, buy a tank of LPG, both pay the same price and are therefore taxed equally despite the wide gap in their incomes. Worse, is that even those without income are also taxed. Students, for instance, pay for the same price paid by their professors for the food or snacks they eat in the school canteen.

Indirect taxation oppresses the poor. The unintended consequences might have likely escaped the perception of the economic planners who built the TRAIN. The current public protests over it may intensify nationwide and may paralyze various economic activities hampering production and the people’s access to food supplies. These could result to the proliferation of crimes to compensate for lost incomes, or to augment one’s purchasing power. The commerce of illegal drugs which is reported to have declined may yet make a strong comeback. Under these confusing circumstances, smuggling and corruption may take a free ride in the rampaging TRAIN.

The Tax Reform law is likely to worsen the peace and order condition of the country and need immediate reforming. The TRAIN needs to stop or be derailed. (MindaViews is the opinion section of MindaNews. William R. Adan, Ph.D., is retired professor and former chancellor of Mindanao State University at Naawan, Misamis Oriental)