The Center of Excellence on Public Sector Productivity is sponsoring 11 Kartilya sessions for the 2018 Productivity Series centering on relevant issues and concerns affecting national development and productivity. These issues have been identified as tax reforms, e-government, regulatory management, knowledge management and innovation, citizen-centered governance, lean management, business excellence, big data analytics, fair competition, phronetic leadership, 5S, and quality circle.
The first of this series of Kartilya sessions started last March 9 with the theme “Implications of the Tax Reform on Public Sector Productivity,” with Director Juvy Danofrata of the Department of Finance and Executive Director Jose Enrique Africa of the IBON Foundation as resource speakers. Ms. Danofrata discussed the principles and application of the Tax Reform for Acceleration and Inclusion or TRAIN Law provisions vis-à-vis the key provisions of its Package 1 that is supposed to uplift the lives of Filipinos especially in the long term. Africa, on the other hand, identified what certain sectors claimed as the loopholes and disadvantages of the said law to the Filipino public.
The tax reform
Danofrata emphasized that the said law, or Republic Act No. 10963, aims to correct a number of deficiencies in the current taxation system and hopes to reduce poverty and inequality through a system where the rich would have a bigger contribution in tax payments while the poor would benefit more from the government’s programs and services.
The DOF, according to Danofrata, acknowledged that the TRAIN Law definitely has an effect on prices of commodities; however, it should not be a very significant increase owing to the research that they conducted that showed the increase should only be 0.3 percent for food and 0.7 percent for other basic commodities.
To address the issue of those who would be directly affected by the oil excise tax, the DOF proposed a P200-per-month cash transfer to the poorest 10 million households in 2018. This will then be increased to P300 per month in 2019 and in 2020.
Danofrata said the TRAIN law envisions to improve the quality of life of all Filipinos by using 70 percent of the revenues that would be raised to fund infrastructure projects over a five-year period as part of the “Build, Build, Build Program” of the Duterte administration. These include provisions for military structure, sports facilities for public schools, and potable drinking water in public places.
The remaining 30 percent, meanwhile, will be used to fund certain social services especially for sugar farmers, investments in education, health, social protection, employment, free skills training at the Technical Education and Skills Development Authority, and the conditional fund transfer to the poorest 10 million households as determined by the Department of Social Welfare and Development.
Through these infrastructure developments, the government hopes to yield a higher quality of education among the workforce, higher income for farmers because of the cash transfers, more efficient farming practices and farm-to-market accessibility, as well as increase in mobility by improving mass transport system in the country. The BIR Director shared that the vision of the TRAIN Law is not to burden the people but to make sure that in the long run, all will benefit from it to provide everybody a better future.
Africa, for his part, stressed that although the government was able to come up with a comprehensive tax reform program through the TRAIN Law, such law did not consider the context of the Filipino public and the unintended consequences of the so-called “most comprehensive taxation system” in the country. He stated that one of the loopholes is that the gains are only concentrated on the rich while the system takes so much from the poor. Such law, he said, would only increase the productivity of the BIR and Bureau of Customs at the expense of the tax system’s effectiveness in delivering vital social and development outcomes.
Moreover, Africa stressed that the claim that the TRAIN Law will eventually rescue 21 million Filipinos from poverty is an overstatement. Based on the data they have acquired from the Philippine Statistics Authority, it is not true that 99 percent of Filipinos will benefit from it despite the purported cash transfers that will then be lifted by 2021. He emphasized that the real effect of the TRAIN Law would only be felt in 2021 by the poorest of the poor after the Cash Transfer Program of the DSWD has ended.
More than TRAIN
The IBON official said that although the TRAIN Law supposedly aims to improve social services, healthcare and education, it would take a lot more factors to be able to address poverty and inequality in the country.
Both speakers encouraged Filipinos to continuously inquire and enter into dialogue with government officials and other sectoral organizations as they assess the implications of the TRAIN Law to the Filipino public’s everyday life. They said that all people need to be vigilant in order for them to be able to assess later the impact of such law to national development and to the people’s collective aspirations.
Africa conveyed his last point that the government need not actually collect taxes from all. Ms. Danofrata concluded by reminding everyone to do their respective shares for the realization of a better life for every Filipino. In the end, both agreed that the common good has to be articulated by every Filipino citizen.