By Floro Mercene
First the administration raises the threshold of the Personal Income Tax (PIT) from P10,000 to P250,000.
But in the same breath, it also raises the excise taxes on oil and petroleum products and expands VAT coverage.
These will undoubtedly trigger price hikes for a wide range of goods and services, and contribute to higher poverty incidence.
The Department of Finance has dismissed the correlation.
The Freedom from Debt Coalition (FDC) was unanimous in saying the PIT-exempt threshold should have been set higher, considering that those in the P250,000-P400,000 bracket still live precarious lives.
The FDC said that based on estimates of a family living wage, a family of six would need around P1,200 daily or higher to meet the requirements of a decent, safe standard of living.
This would amount to P31,200 over 26 working days or P374,000 in a year.
At this income level, the individual taxpayer indeed pays fewer PITS than before, but with the removal of personal allowances and exemptions, the taxpayer at once feels the effect of the 20 percent of the excess over P250,000.
FDC said that while public debate is needed for more awareness on the implications of the Tax Reform for Acceleration and Inclusion (TRAIN), the Lower House approved the first set of tax reform proposals with surprising speed.
FDC believes that the TRAIN foreshadows burdensome consequences on the poor and low to middle-income groups, following the prescriptions of the International Monetary Fund and the World Bank.
TRAIN provides for raising excise taxes on oil and petroleum products and a more expanded VAT coverage.
“These will undoubtedly trigger price hikes for a wide range of goods and services, and contribute to higher poverty incidence,” FDC said, adding government admitted that two of the causes for the increase of poverty in 2006 were the oil price hike and the expansion of the VAT base in 2005 and the imposed higher tax rate in 2006.
While it is true that the rich are the biggest consumers of oil, it is the poor, estimated at 24 million, who are tax-exempt to begin with and have nothing to gain from TRAIN.”
(To be continued)