Taxing the Middle Class Into Poverty and the Need for Stronger Representation of Middle Class Interests in Congress

January 3, 2013

by Paul Farol

The rich, those who profit most from society, are also those who give back the least.

Today, it seems, that nothing crystallizes this idea better than recent news that BIR Commissioner Kim Henares “exempted the country’s richest 1% from paying the newly-imposed VAT on association dues.”

Here’s an excerpt from Vic Agustin’s Cocktales:

An official of the Forbes Park homeowners’ association, who asked not to be identified by name, has confirmed that the billionaires’ village as well as neighboring Dasmarinas are not covered by the new ruling handed down by Revenue Commissioner Kim Henares imposing 12 percent VAT on condominium dues.

It was not clear why Henares, her in-laws live in Dasma, excluded the high-end villages from her order.

…

For instance, Forbes and Dasma residents pay only P23 a square meter every month in VAT-exempt association dues while unit owners of the lower middle-class DMCI condo in flood-prone Pasig struggle with P35/sqm plus 12% VAT in monthly assessments.

To those still suffering from holiday hangover and unable to reach for their calculators, that means the Pag-IBIG-financed buyers of the DMCI condo cough up 70 percent higher dues than the VIP residents of Forbes shell out.

These are the same people who can ring up a Police Director or Military General whenever they have a need for some “security” in their posh neighborhood.  While the rest of us can’t even get an SPO1 to give us the time of day when we need police assistance — this is something I’ll tell you about in another post.

Moreover, these are also the people who probably own businesses and as far as businesses paying the “correct” taxes are concerned, there is a pretty fairly large number of Philippine businessmen who evade taxes.

There is a long string of celebrated tax evasion cases all the way from Lucio Tan to former Supreme Court Chief Justice Renato Corona, along with a slew of celebrities and some previous “nobodies”.  But despite the BIR’s relatively high profile pursuit of these “alleged tax cheats”, what this anti-tax evasion drive amounts to in the end is nothing more than a scare tactic that we suspect becomes a staging point for a corrupt taxman’s “extortion racket”.

But saying that there are corrupt taxmen who overestimate the taxes that a businessman owes, we cannot ignore the fact that there are actually businessmen who wantonly evade paying taxes.

In one such instance, it seems some anonymous group has come out to expose Silka Papaya Soap for an alleged P1.5 billion tax evasion case.

Looking at the alleged P120 million tax evasion of former Chief Justice Corona side-by-side with the alleged P1.5 Billion tax evasion case of Silka Papaya, I’d say that the BIR might again be overlooking the rich as it did in the case of the Forbes and Dasma home owners.

For what reason, we can all just guess.

At a time when the government rolls out a brand new dole out program to take care of poor pototoys and pepays, it doesn’t seem like a coincidence that the Aquino government is increasing taxes as well as rolling out new taxes.

Along with the higher Sin Taxes, the BIR is now going after online merchants (and perhaps online publishers):

The Bureau of Internal Revenue (BIR) has decided to tax the rapidly growing online sales of goods and services, it was disclosed yesterday.

A panel has already drafted proposed regulations to cover all angles of the Internet transactions based on the instructions of Revenue Commissioner Kim S. Jacinto-Henares.

The proposed guidelines stated that it recognizes “the advancement in the commercial use of the world wide web, the Internet has become the vogue medium not only for advertisements but for the conduct of retailing which has given way to the significant growth of the virtual shopping mall or online market-web stores.”

While the rich paying a pittance for the copious amounts of privileges they enjoy to the hilt, on the other end we also have the millions of “poor” people who are getting loads of freebies for almost nothing.  And guess who is paying for all of this?  It’s every single employee and salaried worker whose pay gets a sizable chunk cut out of it as “with-held income tax”.

This all goes back to a conversation I had a few months ago with a friend. Along with horrifically inequitable taxation that’s going around, we also discussed the idea that as far as the term “marginalized sector” is concerned, it should be applied to the Philippine middle class.

This was back in the month last year when there was this big stink over the Comelec’s decision to disqualify a number of party list groups from running in the 2013 National Elections and people were beginning to question, again, whether the party list group system was working as intended.

Party list groups, as most people understand it, are supposed to represent and work for the interests of the country’s marginalized sectors.  These are the urban poor, fishermen, farmers, laborers, tribal minorities, and other such classes of citizens who may be otherwise referred to as “the poor” or can be assumed to lack representation.

Considering that almost every candidate who ran for election and won since the first Aquino Administration has a “pro-poor” or “poverty alleviation” program of one sort or another, it ought to be apparent by now that “the poor” are not “under represented”.

Moreover, consider also that the bulk of the government’s budget goes to programs that are supposed to help the poor.

The poor receive free education, free medicines, free health care, free housing, and now, thanks to the recently signed Reproductive Health Law, free contraceptives of every sort as well as free medical care for their genitalia.

It’s an endless gravy train for the poor.

However, in terms of number and in terms of representation, the middle class is small in number whose interests are barely represented in Congress.

The general theory about how it all evens out is that  the middle class also benefits from the programs funded by the taxes they pay.

If that were true, at all, we’d probably have better roads… there’d be police stationed near our middle class homes… we could avail low cost home loans…  we wouldn’t have to pay so much for health care or at all, notwithstanding Philhealth benefits… we could send out children to public schools… etcetera… etcetera… etcetera…

But do we enjoy these?  Reality is, despite the availability of these things to the middle class, these government services are so shoddy that we’re forced to pay for something better — which shouldn’t be necessary at all.