Why is Philippine President Under Fire Over tax Reform?

President Rodrigo Duterte speech 07/01/16. Photo by: Presidential Communications Operations Office.

MANILA, Philippines (ViaNews) – Philippine president Rodrigo Duterte is currently under fire over the highly-hyped tax reform, which his critics describe as deceptive and a burden to the poor.

Back in December 2017, President Duterte signed into law the Tax Reform for Acceleration and Inclusion, or TRAIN, which the country’s Finance department described as the “biggest Christmas and New Year’s gift” to the Filipino people.

The tax reform is supposed to be a “much-needed relief,” as the Finance department puts it, as it provides personal income tax exemptions to those receiving nearly $5,000 salary annually while, at the same time, adjusting the excise tax on fuel and automobiles.

However, a closer look at the said tax reform reveals that the richer and those in higher income group of the Philippine society will reap the benefits while the poor, who do not have an income tax to be exempted from, will have to endure the increasing prices of staple goods and services due to the imposition of heavy excise tax.

This has since drawn ire of many Filipinos who are now experiencing the effects of deceptive tax reform.

Increased prices of staple goods and services

Instead of bringing much-needed relief to many Filipinos who are receiving a meager salary, critics pointed out that they might end up getting lesser take-home pay with the newly-passed tax reform law.

A progressive think tank Ibon Foundation said about 15.2 million families do not have any income tax to be exempted from because they are either minimum wage earners who are already exempted from income tax as stipulated in the previous tax policy or are working in the informal sectors where they have erratic income.

“Yet while not getting increased take-home pay, they will have to endure price hikes as a direct or indirect effect of higher consumption taxes,” Ibon Foundation said.

A national organization of Filipino fisherfolk, Pamalakaya, said the expected increase in fuel price may leave poor fisherfolk prey to loan sharks as petroleum products eat up nearly 80 percent of their daily grind.

Sadly, a fishing trip may not always guarantee profit due to dwindling fish catch nowadays, said Pamalakaya. This, the group said, will compel fisherfolk to borrow money from loan sharks that offer excessive interest rates.

“Because of TRAIN’s oil-price hike, fishermen have to cut their fishing trip from the regular six to eight hours to four to six hours. They also have to reduce their fishing days from the average of four to five days a week to three days a week. This also means a diminution of their already small income and days of starvation,” Pamalakaya chairperson Fernando Hicap said in a statement.

Gabriela Women’s Party, in a statement, also assailed the tax reform, saying that over six million Filipino women who are either self-employed or unpaid family workers will never benefit from TRAIN but will instead be “slapped with higher prices of basic commodities and services.”

Who reaps the reward?

There are, however, those who would be all too happy to see President Duterte’s tax reform go through.

Sonny Africa, an economist and executive director of Ibon Foundation, said that while middle-class families earning $1,200 monthly will get an additional income of $1,600 annually, it is the richest one-percent who will benefit the most, with a projected $2,000 to $6,000 additional annual income in the year 2023, when taxes are further lowered as provided in the signed tax reform law.

Lawmakers, themselves, who crafted and passed the bill for President Duterte to sign into law, will also reap benefits from TRAIN as they, too, will receive tax exemptions.

“Hundreds of billions of pesos can be generated if only the government were unafraid to impose higher taxes on the country’s wealthiest families who have accumulated trillions in pesos and can well afford to contribute more to government revenues than they already do,” Ibon Foundation said.


Ibon Foundation said the Philippine tax reform is among the recommendation of the United States government, which can be found in a document dubbed as “The Arangkada Philippines Project.”

The said document specifically stipulates a recommendation that read: “Undertake comprehensive tax reform to reduce CIT (corporate income tax) and individual income tax, while raising VAT, ACT (alcohol, cigarettes, and tobacco), and fuel excise taxes. Reduce or eliminate small taxes and fees that increase business costs.”

Tax exemptions on foreign corporations will directly benefit US firms, which account about 45 percent of the country’s electric power system imports, 25 percent of aerospace imports, 24 percent of medical equipment imports, 10 percent of water equipment and services imports, and 26 percent of information technology imports, according to Ibon Foundation.

Some 31 percent of the foreign equity in business process outsourcing companies also belongs to US firms.

Temporary restraining order sought

Progressive lawmakers have questioned Duterte’s tax reform law before the Supreme Court and have asked the high court to issue a temporary restraining order at the minimum.

In a statement, National Union of Peoples’ Lawyer chairman Neri Colmenares said they are not against lowering of personal income tax.

“Income and wealth distribution through tax justice has been one of our long-standing advocacies inside and outside Congress,” Colmenares, who is among the lawyers of the petitioners against the tax reform law, said.

TRAIN, he said, is “deceptive” for “it takes away from the people what it gives in the form of regressive taxes which have long been oppressing the people.” (ViaNews)

Leave a Reply

Your email address will not be published. Required fields are marked *