Bishops, labor groups oppose Duterte’s tax reform law

Changes are intended to make Philippine taxation system ‘simpler and fairer’ and generate US$2.6 billion in revenue

A tax reform law that aims to generate funds for the Philippine government’s infrastructure and socio-economic programs has been met with disapproval by the country’s bishops and labor unions.

President Rodrigo Duterte on Dec. 19 signed the “first package” of his administration’s tax reform initiative supposedly as an “early Christmas gift” for the Filipino people.

The “second package,” which aims to deal with corporate income taxes, will be discussed next year.

The president said one of the law’s “significant breakthroughs” will be the exemption of individuals earning US$5,000 or less a year from paying taxes starting Jan. 1.

“The law also addresses long and overdue corrections in our tax laws and introduces a more progressive tax system for the rich and the poor,” said Duterte.

But several of the country’s Catholic bishops described the new law as “anti-poor.”

Manila Auxiliary Bishop Broderick Pabillo said that even if the law provides tax exemptions or lower taxes for the poor, it increases value-added taxes for everything.

“With the increase in prices of basic commodities, everyone will be affected,” said the prelate.

The new tax reform law, which promises to make the country’s tax system “simpler, fairer and more efficient,” is expected to generate US$2.6 billion in revenue.

Duterte said the new law is his “biggest Christmas gift” to the people because 99 percent of the taxpayers will benefit from it.

Bishop Arturo Bastes of Sorsogon, however, said the “poor, who form the great majority of the country’s population, will suffer the brunt of increased taxes,” and added that the new law “favors the middle class and the rich.”

The prelate said a better tax law would have imposed higher taxes on the rich to compensate for exemptions given to the lower-income group.

Up to 15.6 million informal workers affected

An estimated 15.6 million informal workers, who are not covered by labor regulations and without protection benefits, are expected to be hit hard by the new tax law.

Alan Tanjusay, spokesman of the Associated Labor Unions – Trade Union Congress of the Philippines, said workers in the informal economy will “fall further below the poverty line.”

Informal-economy workers include self-employed people, small-scale producers and distributors of goods and services.

Also included under the category are drivers of public transportation, street vendors, sales assistants in malls, barbers, cooks, waiters, dishwashers, porters, and street-sweepers.

Tanjusay said unprotected workers will be hardest hit by the law’s provisions on an excise tax on fuel, sweetened beverages and coal.

Informal-economy workers in the country are not covered by labor laws and regulations and have no social security and health insurance.

Higher taxes for basic goods

In the wake of apprehension over several provisions of the law, the Department of Budget and Management submitted to Duterte on Dec. 20 a list of items that he might still be exempted.

Budget Secretary Benjamin Diokno, however, declined to give details of the provisions he wanted the president to remove from the new law.

Public reservations were raised over increased taxes for cars, fuel, tobacco, and some beverages.

Although salaried workers will have lower taxes to pay, higher taxes on oil products and the expanded coverage of the 12-percent value added tax and other levies will affect everybody.

For example, the law provides that a US$0.12 tax will be imposed on diesel, kerosene, cooking gas and bunker fuel for electricity generation in the next three years.

Tax on gasoline will also increase from US$0.09 per liter to US$0.19 over three years.