MANILA, Philippines — Workers see tougher times in 2019 as the second phase of the controversial tax reform package – which takes effect today – threatens to further push up prices of fuel and basic goods and hurt employment.
“Workers will be facing a serious challenge in 2019 because of the tax reform package 2. The government wants to call it TRABAHO but it’s a misnomer,” said Julius Cainglet, vice president of the Federation of Free Workers (FFW), the country’s oldest trade union.
TRABAHO, which stands for Tax Reform for Attracting Better and Higher Quality Opportunities, is how the government wants the second round of the Tax Reform for Acceleration and Inclusion (TRAIN) law to be officially called.
“For the past year, workers suffered from the high inflation rate and if the government pushes through with the implementation of additional excise tax this January, prices of goods will definitely go up again, so it will present a big problem for the workers,” Cainglet pointed out.
He also called for a serious scrutiny of infrastructure projects under the government’s Build, Build, Build program.
“We do recognize that the Build, Build, Build program will bring potential employment. But we still need to see the type of projects because it may only open vacancies for technical experts that would come from other countries,” Cainglet said.
He said infrastructure projects may also be handled by big contractors that may sub-contract workers. “Do we want just additional, but not decent, employment?”
Sonny Matula, Nagkaisa labor coalition chairman, said illegal contractualization remains rampant despite the regularization of over 400,000 casual workers in 2018.
“We do recognize that the campaign for regularization encourages employers to voluntarily regularize their workers. However, contractualization is still the norm,” Matula said.
He said the penalty provided under existing regulations entice employers to just commit labor-only contracting and continue to violate labor standards.
Moreover, the Department of Labor and Employment (DOLE) could not inspect all commercial establishments and check on violations due to lack of labor inspectors, Matula said.
He said the government must also address potential problems that may arise from a new phenomenon called artificial intelligence.
“The government must support future of work programs in response to the artificial intelligence phenomenon promoting employment of not only workers, but robots,” Matula said.
The Bukluran ng Manggagawang Pilipino (BMP), for its part, warned of “imminent and increasing exodus” of young, talented and skilled Filipinos with the implementation of the second tranche of the tax reform package.
In a statement, the BMP through its senatorial bet Leody de Guzman said “the best and the brightest of Filipinos have been leaving the country with the continued implementation of the neoliberal policies of deregulation, liberalization, privatization, contractualization ever since the Cory Aquino administration.”
He added the “runaway inflation induced by the oil excise taxes of the Duterte administration since last year may be the final straw to break the camel’s back.”
The increasing exodus of young adults to greener pastures abroad was also shown in a Gallup poll conducted from 2015 to 2017.
The poll revealed that 16 percent of highly educated Filipinos will likely leave the country to work or live abroad.
“Unfortunately, with the taxation shift from income to consumption, the tax burden is more felt by the poor although they did not benefit from the increased exemptions to income taxes. Worse, they are overtaxed and yet they hardly feel the social services and safety nets that were promised to be part of tax reform measures,” he maintained.
More price hikes
The New Year will usher in the second round of increase in taxes on diesel, gasoline, cooking gas and other oil products under the TRAIN law.
Starting Tuesday, the tax on diesel will go up by P2 per liter, from the current P2.50 to P4.50, while the levy on gasoline will increase also by P2 to P9 per liter.
The excise tax on cooking gas or liquefied petroleum gas will jump by P1 per kilogram to P2.
Tax on bunker oil, which is used for producing electricity, will rise from P2.50 to P4.50 per liter.
Levies on other oil products like asphalt and waxes will go up from P7 to P9 per liter or kilogram. Aviation gas tax will remain at P4 per liter.
Like the first adjustment in 2018, the second round will be higher than listed because TRAIN imposes a tax on tax: the increase will be levied on the 12-percent value added tax.
Thus, the P1 tax increment will actually be P1.12, and P2 will be P2.24.
The second round of increase is expected to cause a domino effect on prices of products and services, including transportation, fares and electricity. The steady rise in consumer prices – economists call it inflation – was largely blamed on the TRAIN law.
Marikina Rep. Romero Quimbo, who heads the Liberal Party bloc in the House, said Assistant Finance Secretary Teresa Habitan had told congressmen that the Department of Finance was projecting a P40-billion revenue loss if the 2019 fuel tax increase were suspended for the whole year.
“That could easily be offset through more efficient tax collection and through the various tax measures that the House has approved,” he said.
Among the approved measures were two bills increasing levies on alcohol and tobacco products and another bill seeking the grant of a general tax amnesty next year to thousands of delinquent taxpayers.
Rep. Michael Romero of 1-Pacman, one of the authors of the amnesty bill, said the proposed amnesty grant is among President Duterte’s legislative priorities.
“It aims to give delinquent taxpayers the opportunity to have a clean slate by paying an amnesty tax and to be fully compliant on their tax obligations moving forward,” he said.
He said based on previous amnesty grants, the government could generate tens of billions of pesos from the planned new reprieve.
“It’s a one-time grant that we hope taxpayers with delinquencies would avail themselves of,” he added.
Romero pointed out that “even if just half or one-fourth of the revenue target is collected, it would be a big boost to government resources that could fund vital services.”
He said he expects many families that have inherited properties to take advantage of the amnesty offer since the estate tax has been cut from as high as 20 percent to just six percent under the TRAIN law.
Aside from the reduced tax, the law increased the standard deduction from P1 million to P5 million and exempts a family home worth up to P10 million (the previous limit was P1 million) from the estate levy, he stressed.
The proposed amnesty would cover 2017 and prior years. An applicant would be required to file with the Bureau of Internal Revenue (BIR) an amnesty return accompanied by a notarized statement of total assets as of Dec. 31, 2017. The applicant would pay an amnesty tax of two percent of such assets.
On estate tax liabilities, the amnesty levy is six percent.
Deputy speaker and Batangas Rep. Raneo Abu said the proposed estate tax liabilities amnesty “will promote the interest of heirs in developing inherited real properties and boost revenues of local government units.”
“It will also result in the updating of real property records and titles,” he said. – with Jess Diaz, Cecille Suerte Felipe, Sheila Crisostomo