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

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.

bureau of internal revenue philippinesThere 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.

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44 Comments on “Taxing the Middle Class Into Poverty and the Need for Stronger Representation of Middle Class Interests in Congress”

  1. – Feed the poor that takes the majority of the population is a sure ticket to win election

    – Favor the rich will open a stream of donations for election

    – And the middle class . . . the taxable of all!

    Sad reality, myself as a middle class =(

  2. What irks me is that we have all of these dole outs to the poor, yet the poor remain poor.

    Worse, a lot of the poor CHOOSE to remain poor mainly due to the “victim” mindset.

    The worst thing is that we have entire political parties and personalities (mainly of the Maoist bent) who WANT them to be poor in the name of “social solidarity.”

    1. Nakakainis yung idea na todo ang kayod, tapos kakaltasan tayo ng sobrang laki, pero hindi naman tayo ang nakikinabang.

      Then on the other hand, we have these rich elite lords it over government resources but hardly fork anything for the upkeep.

      If at all, it’s as if we the middle class are being exploited by both the rich and the poor.

      Pakshet.

      1. This storyline theme can not be true!!

        NO WAY, NO WAY, NO WAY not with DAANG MATUWID being the rule across Pilipinas!!! PersiNoynoy, as ProPinoy-dot and a few other blogplaces would write about… PersiNoynoy is a God-Send (okay… maybe not a God-send but just a child of a former president). So surely Kim Henares’ ruling will be for “… the better good”, because it is from a President who is a child of a former president.

    2. Worse, a lot of the poor CHOOSE to remain poor mainly due to the “victim” mindset.

      – My thoughts exactly. That’s what I was trying to say in my article about Bishop Garcera’s statement on “poverty not being a problem.”

  3. I think the correct term is not evasion but “avoidance”. Evasion in itself is not “done” by these companies/individuals as I recall it is more severe than avoidance. Avoidance basically uses all legal remedies to reduce the tax you pay annually. I think I got that right so correct me if I am wrong.

    Also, I think there really is something wrong with our BIR commissioner. She should be sued/axed already as she is showing really to be biased in her implementation/exercise of the law.

    I know I read an article connected to the issue of the Dasma/forbes non-VAT dues that the big boys don’t complain because they don’t want to be scrutinized.

    As was said before to me, no matter how legal you are doing your books/by the book, there is still something to be found by the BIR if they wanted to because of all the muddled up technicalities they have created for themselves.

    1. Check this out Sphinx:

      “Tax avoidance, on the other hand, involves the legal re-arrangements of one’s economic activities in order to lower the tax liability. This is done by moving capital or labor to areas, geographical or otherwise, where tax rates are lower and/or by manipulating the tax parameters through the legal means to spread or defer the tax liability over time thereby effectively reducing the tax rate. Tax evasion is done by a tax payer either singly or with the help of some tax expert like a lawyer and an accountant.

      As such, evasion and avoidance are interdependent activities. Significant and well-known tax avoidance could induce increased evasion.”

      http://silka-papaya-tax-evader.blogspot.com/p/what-is-tax-evasion.html

      1. Thanks Paul.

        So I somewhat got it right. =)

        I think even Europe (EU) is now looking at ways to address this avoidance by big corporations to “fix” their tax collection targets and at least reach it better. =)

  4. “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.”

    Some are more equal than others, apparently.

  5. It’s as if the current administration wants to break down the middle class and make everyone who does not agree with them poor. Of course, this is only my own interpretation.

      1. I love my country but I want a comfortable stable life under a government that is fair to everyone.

        I’d love to pay more taxes if things improve but that’s not how it is right now.

        I feel like I’m simply burning my hard-earned money and I’m sure many feel the same way.

        1. well then be a force for positive change here dont leave us hehehe i lost a perfectly serviceable fiance because i wouldnt leave philippines we are needed here

        2. Don’t you realize? The Philippines hate critical SMART people. So where’s the love for country if most Filipinos hate people who are SMART?

        3. Your love for this country is very dysfunctional and delusional dumkopf. Well the reason your fiance left you is obviously because either she can’t stand stand the sorry state of this country or she can’t find any decent jobs here. To be more precise by logic, YOU are also the reason why she left you for not looking the real solutions for this country. All you did is nothing but pinoy prayd, bahala na and any dysfunctional mediocrities you just embrace because you’re being such a sore loser. Do me a favor dumkopf and do some soul-searching. You need it very badly.

        4. You’re not looking on the right solutions sendongslut. You’re once again making yourself a loser with your narrowminded mentality.

        5. Indeed some felt it that way. And that is why I hate the damn tax system as it is! If it goes my way I WANT to squeeze the elite(super rich) NOT because I want Socialism but because they are basically the most ungenerous type of people there is!

          They preach they are the “job creators” but the problem is they are just TOO GREEDY and RECKLESS to “give out” capital to truly stimulate the economy for to benefit the working public. Instead they put their capital on profit-generating pursuits that has little or no value on job creation.(like focusing too much on finance and too little on manufacturing)

          These elites(not all of them)which are in bed with the people in high places of government, are just living off the hard toil of the middle class and the working men through abusing their “leverage”. I do not dismiss their “contributions” but its about time they pay what is due.

          In reality, the ones impoverished is not really the main cause of their supposed “hatred of intellectuals”. The greater contributor of it is the media who PROMOTES SUCH MINDSETS plus the DOCTRINES OF CHRIST CORRUPTED BY PEOPLE PRETENDING TO BE OF GOD.(which by the way truly pisses me off! Just look at CBCP!)

          I feel that the country has a similarity to that of Oceania in George Orwell’s 1984 only in certain factors of course.

  6. i believe the rich were exempted because they were already paying so much. this article misrepresents the situation by not talking about how much the “1%” is already being taxed. proper research is tedious much easier to mail an article in and put in some “controversial” claims to rile the readers

    1. You seem confused and your belief seems to be mired in the confusion.

      Philippine businesses are taxed based on their declared incomes.

      Their business income is basically gross income minus expenses.

      In a number of papers I’ve read on the matter of tax evasion, businesses here usually under report their income as well as over state their expenses — in addition to misapplying allowed deductions.

      Salaried workers and employees on the other hand get their taxes deducted automatically by their companies, who then remit these taxes to the government.

      Sometimes, the companies over charge or over deduct taxes from their employees just to save on salary payments. Most employees don’t even bother to double check their income taxes or apply the allowed deductions.

      1. my comment was not accepted try again: kris aquino paid 32 million in taxes for one year now are we gonna bitch about some association dues? really? why you talk about businesses when the topic was association dues. you are confused sir

        1. In translation from you rebuttal: This is sendongslut, jon-asshole’s husband. No one listens to me because I’m stupid and a hostile.

        2. what do you mean “in translation from you rebuttal”? hehehehehe halaka your english teacher is mad hehehe learn english then get back here. help us help you heheheheheee

      2. Moreover, some can opt for Tax Avoidance, a legal means to reduce one’s tax by utilizing loop holes in law.

    2. There really is no issue on what is being paid in tax. But you have to keep in mind that businesses underdeclare revenue and overdeclare expenses. Thereby shrinking their net income and hence the total taxable amount.

      What is important however is that the BIR do its job and check these declarations.

      If you are being taxed 35% of what you earn compared to a rich person who is being taxed around 20% after getting all the exemptions, of course you can cry foul in that regard. Why?

      Well, if you are being taxed 35% while you are forced to make ends meet and just live in a cramped house that is within what is left of your means then something is wrong. Plus the fact that the 20% being taxed the big guy is also being tweaked in favor of them.

      They maybe paying 20m, 50m or whatever. But paying the actual amount they should be paying would not be forcing them to live in smaller houses and ration their food. It wouldn’t force them to go abroad to feed their families. Get the connection?

  7. The “poor” are no longer marginalized? I agree! The poor get all the freebies at the cost of those who are working for their keep. Those who work for themselves are obliged to pay for others who laze away and gamble instead on Pacquiao fights. It violates the Biblical principle: “He who does not work should not eat.” (I Thes. 3: 10)

    1. These kind of “poor” people are the ones I actually despise(not in a personal sense) because some of these guys truly DESERVE where they are! I still do think we act in “charity” to them but under a “minimal” level of commitment to make them realize, they got to move their butts. I suggest we do in a way like those of FDR’s NRA(National Recovery Act) only this time, the Private Sector will contribute likely through increased taxation for THE ELITES(somehow it is like a mandatory “act of charity” for some of these hypocrites)

      Moreover it is time that BIR impose STRICTER penalties on companies deliberately “spinning” their books to avoid proper taxation. Double the penalty on them if caught.

      In an extreme case for me:
      Corporate crime must classified as a CRIMINAL act in par with murder. Going to jail and if possible WITHOUT PAROLE.

  8. By the way,

    “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.”

    Ganid talaga! Ang di alam ng mga ito pandugtong lang sa maliit nilang sahod.(sa karamihan na nag-oonline) Parang ukay-ukay na naka-internet ang mga mga online shops.

    BIR maawa kayo sa mga taong nakakaraos lang araw-araw. Alam ko may mabuti pang budhi diyan sa mga makapangyarihan at ang nakakatigil lang niyan ay uhaw sila masyado sa kapangyarihan na hindi marapat gawin.

    As a proverb once stated.
    “Greedy people cannot be generous.”

    Kung ako pa sa kanila, mag-tax man sila pwede yung tulad sa ginawa nila noon sa mining companies na 2% lang?kung di talaga mapigilan. Mas maganda sana kahit 2% lang yan ay magamit ito para sa naghihirap at kumakayod na kapwa Filipino.

  9. I have a suspicion that the greedy elite(financial even intellectual) and their politician friends do not like an “intelligent and idealistic, middle class” in this country. No wonder the “brain drain” is a continuing phenomenon in this country. Best find a way to leave the country and for my personal view, “I’ll just help as much as I can to get a few out of this quagmire.”

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