Restore maximum income tax rate to 70%
Restore maximum income tax rate to 70%
Updated 11:01pm (Mla time) Sept 23, 2004
By Neal Cruz
Inquirer News Service
Editor's Note: Published on page A14 of the September 24, 2004 issue of the Philippine Daily Inquirer
(Due to a computer glitch, an old column with a similar date was sent to the Inquirer and published in the Sept. 22 issue. Though it was written a year ago, the issue remains valid today, however. The following column should have been published instead. Sorry for the mix-up.)
THE PRESIDENT and Congress continue to dance the “moro-moro” around the pork barrel, an outstanding example of corruption, wastage and abuse of power in government. The President asks members of Congress to forego 40 percent of their pork barrel. The legislators counter that the President should forego her own pork barrel (yes, she has it in the form of discretionary, intelligence and social funds).
But all this is just for show and intended to fool the people and preserve the status quo. If the President is sincere about reducing the congressional pork barrel, all she has to do is remove the appropriation from her proposed budget -- and not just 40 percent of it. No need to ask Congress' permission.
If Congress is sincere about cutting the pork in the executive department, all it has to do is reduce the appropriations for intelligence and discretionary allowances. So why are they not doing this?
If Congress would cut all government allowances by just 20 percent, about P20 billion would be saved, an amount equal to the expected revenue from the proposed increase in tariff on oil imports as well as the congressional pork barrel.
As stated last Monday, while the Constitution prohibits members of lawmaking bodies from increasing their own salaries, they have been surreptitiously increasing their own allowances and other benefits. The list of allowances top officials pay themselves can fill a whole page. Aside from the usual discretionary and intelligence allowances, there are allowances for cars, drivers, gasoline, maintenance, travel, mail and phone, entertainment, housing, etc., etc. Some even have grocery allowances.
And in the case of government-owned or -controlled corporations (GOCCs) and government financial institutions (GFIs), their boards of directors can and have increased their own salaries -- and even their retirement benefits.
Easily the most obnoxious is the case of the Development Bank of the Philippines whose board of directors approved a P75,000 budget for each director for "office and staff allowance." It allowed each director to appoint two relatives to be paid out of this allowance. It was disapproved by the Commission on Audit (CoA), but the board defied the CoA and went ahead and created the new positions anyway. The directors obviously believe that charity begins at home.
It is not only members of Congress and boards of directors who have abused their power to increase allowances. Members of provincial, city, municipal and even village councils have abused theirs, too.
Easily the most abused privilege is the car plan. Members of the boards and councils attend meetings only once or twice a month. They already have one or two or more of their own vehicles. Yet they are provided with more new vehicles at taxpayers' expense -- luxury models, even -- plus backup vehicles for their bodyguards.
Under these car plans, the vehicles bought by the government become the properties of the users after a few years and after they have paid, on installment, a token price. In some cases, when an official is replaced, he does not return the vehicle assigned to him and it is lost to the government.
Theoretically, there is a watchdog -- the CoA -- that is supposed to check this form of abuse. But the auditors are co-opted into the conspiracy by being given their own cars. So they turn a blind eye, and everybody is happy. It is like letting a gang of thieves loose in the vaults of the Treasury.
The chiefs of the GOCCs, the governors and mayors use these benefits as a bribe to get what they want from the board and council members, in the same way that the President uses the pork barrel as a bribe to members of Congress.
In the face of such wanton abuse and wastage, President Gloria Macapagal-Arroyo wants to get the money to fund them from the people through bigger and more taxes. She has proposed eight tax reform measures. Of these, only the increase in the taxes on tobacco and liquor has the least opposition, although this is likely to increase smuggling and reduce local production and sale of these products, hence, less tax revenues collected.
The most regressive is the increase in oil tariff. This will impact on power and transportation rates, and hence on all products, and raise the inflation rate. It will hit the poor the hardest, but the government likes this because it is the easiest to collect.
One basic principle of taxation is to tax most those who can afford it the most. Yet our tax structure favors the rich and punishes the poor, especially the middle class. While increasing consumption taxes, which hits everybody, it has reduced direct taxes on the rich.
It has reduced the maximum income tax rate from the original 70 percent to only 30 percent. Thus, the mega-rich, the multi-billionaires that Forbes Magazine listed among the richest in the region, pay the same 30 percent tax rate as a member of the middle class. That original 70 percent maximum rate, mind you, applied only to income above P500,000 a year.
Before Congress enacts a new tax measure, it should first raise the 30 percent limit on income tax rates to the original 70 percent. But of course the legislators lowered the limit because it benefits them. They themselves earn millions for which they should pay the correct taxes.
Updated 11:01pm (Mla time) Sept 23, 2004
By Neal Cruz
Inquirer News Service
Editor's Note: Published on page A14 of the September 24, 2004 issue of the Philippine Daily Inquirer
(Due to a computer glitch, an old column with a similar date was sent to the Inquirer and published in the Sept. 22 issue. Though it was written a year ago, the issue remains valid today, however. The following column should have been published instead. Sorry for the mix-up.)
THE PRESIDENT and Congress continue to dance the “moro-moro” around the pork barrel, an outstanding example of corruption, wastage and abuse of power in government. The President asks members of Congress to forego 40 percent of their pork barrel. The legislators counter that the President should forego her own pork barrel (yes, she has it in the form of discretionary, intelligence and social funds).
But all this is just for show and intended to fool the people and preserve the status quo. If the President is sincere about reducing the congressional pork barrel, all she has to do is remove the appropriation from her proposed budget -- and not just 40 percent of it. No need to ask Congress' permission.
If Congress is sincere about cutting the pork in the executive department, all it has to do is reduce the appropriations for intelligence and discretionary allowances. So why are they not doing this?
If Congress would cut all government allowances by just 20 percent, about P20 billion would be saved, an amount equal to the expected revenue from the proposed increase in tariff on oil imports as well as the congressional pork barrel.
As stated last Monday, while the Constitution prohibits members of lawmaking bodies from increasing their own salaries, they have been surreptitiously increasing their own allowances and other benefits. The list of allowances top officials pay themselves can fill a whole page. Aside from the usual discretionary and intelligence allowances, there are allowances for cars, drivers, gasoline, maintenance, travel, mail and phone, entertainment, housing, etc., etc. Some even have grocery allowances.
And in the case of government-owned or -controlled corporations (GOCCs) and government financial institutions (GFIs), their boards of directors can and have increased their own salaries -- and even their retirement benefits.
Easily the most obnoxious is the case of the Development Bank of the Philippines whose board of directors approved a P75,000 budget for each director for "office and staff allowance." It allowed each director to appoint two relatives to be paid out of this allowance. It was disapproved by the Commission on Audit (CoA), but the board defied the CoA and went ahead and created the new positions anyway. The directors obviously believe that charity begins at home.
It is not only members of Congress and boards of directors who have abused their power to increase allowances. Members of provincial, city, municipal and even village councils have abused theirs, too.
Easily the most abused privilege is the car plan. Members of the boards and councils attend meetings only once or twice a month. They already have one or two or more of their own vehicles. Yet they are provided with more new vehicles at taxpayers' expense -- luxury models, even -- plus backup vehicles for their bodyguards.
Under these car plans, the vehicles bought by the government become the properties of the users after a few years and after they have paid, on installment, a token price. In some cases, when an official is replaced, he does not return the vehicle assigned to him and it is lost to the government.
Theoretically, there is a watchdog -- the CoA -- that is supposed to check this form of abuse. But the auditors are co-opted into the conspiracy by being given their own cars. So they turn a blind eye, and everybody is happy. It is like letting a gang of thieves loose in the vaults of the Treasury.
The chiefs of the GOCCs, the governors and mayors use these benefits as a bribe to get what they want from the board and council members, in the same way that the President uses the pork barrel as a bribe to members of Congress.
In the face of such wanton abuse and wastage, President Gloria Macapagal-Arroyo wants to get the money to fund them from the people through bigger and more taxes. She has proposed eight tax reform measures. Of these, only the increase in the taxes on tobacco and liquor has the least opposition, although this is likely to increase smuggling and reduce local production and sale of these products, hence, less tax revenues collected.
The most regressive is the increase in oil tariff. This will impact on power and transportation rates, and hence on all products, and raise the inflation rate. It will hit the poor the hardest, but the government likes this because it is the easiest to collect.
One basic principle of taxation is to tax most those who can afford it the most. Yet our tax structure favors the rich and punishes the poor, especially the middle class. While increasing consumption taxes, which hits everybody, it has reduced direct taxes on the rich.
It has reduced the maximum income tax rate from the original 70 percent to only 30 percent. Thus, the mega-rich, the multi-billionaires that Forbes Magazine listed among the richest in the region, pay the same 30 percent tax rate as a member of the middle class. That original 70 percent maximum rate, mind you, applied only to income above P500,000 a year.
Before Congress enacts a new tax measure, it should first raise the 30 percent limit on income tax rates to the original 70 percent. But of course the legislators lowered the limit because it benefits them. They themselves earn millions for which they should pay the correct taxes.
posted by Dante at 11:01 PM
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