When the nail sticks out

rants, raves and randomness

Over taxation, a strategy of a country that is at the brink of collapse

Yesterday, I visited a friend, now pregnant with her third child. Our conversation eventually drifted to the welfare/support system for non-Japanese residents giving birth and raising a child. I was quite surprised at the extent of government support the city extends to those who have to have to deliver by c-section : while it costs 8,000 USD for a c-section, because of the national insurance, she paid NADA. Yes, nada. And her husband is not even Japanese! She also gets money as a single mother to support her other kid. It’s impressive really. Her husband (husband, technically, only within American soil) didn’t expect for her childbirth to be covered. After all, the kid is not Japanese and she hasn’t worked since 2012.

Now, I just can’t help muse at how different the systems here and back home. Walang ganyan sa amin sa Makati! Mind you, I don’t want to be accused of being an extreme negativist (yes, the word does exist!)..but I can’t help get frustrated when I read the news. It’s all about a country that takes and takes and never gives anything back :

Under the law, the administrator or heirs of deceased persons need to file an estate tax return where the gross value of the estate exceeds P200,000 and where the estate consists of registrable property, motor vehicle, share of stocks and other similar property as a precondition for the transfer of ownership.

The estate tax return shall be filed within six months from the time of death. However, the BIR, may in meritorious cases, grant extension not exceeding 30 days.

Henares said the government’s goal is to boost estate tax collections to around P50 billion by 2016 from the current P1 billion.
<  philstar.com/ business/2013/ 09/02/1160771/bir-focus-estate-tax-eyes-p50b-2016

And yet more taxes! Taxes taxes taxes! Why do you always have to take it out on us, middle class citizens? Someone on the above article commented :

Taxes taxes taxes, a strategy of a country that is at the brink of collapse

Taxes taxes taxes, a strategy of a country that is at the brink of collapse

PH has one of the HIGHEST TAX rates compared to more WELL OFF countries in southeast asia. For what? Really?
We get Taxed as high as the mountains but it all goes down to bad governance.
Where else can you see the “homeless Tax free citizen” getting a new house and lot for free
While the “Middle class with Highest Tax rate” endure Long hours of hard work, along with the daily commuter hassle just to get wage Get Nothing? Nothing for free?
Thank you. My taxes deducted each month just paid a house and lot for the NON Tax Paying decay of society.

My sentiments exactly. It’s a country that rewards the slackers and punishes those who work. And for what?!

Over taxation, a strategy of a country that is at the brink of collapse

Over taxation, a strategy of a country that is at the brink of collapse

You can argue that my situation back home and now are completely different. I am married now and I wasn’t then.  You can also argue that I was working part-time in Japan while I worked full-time in the Philippines. But before you throw those arguments at me , I have numbers below to prove my point: Income Tax Rates in Asia and Top Marginal Rates Asia 

I came upon this article on the Philippine Star, posted by someone on my news feed :

In order to pool mammoth amounts of “savings,” the Aquino administration cancelled infra projects wholesale. The Belgian-assisted dredging of Laguna de Bay, the French-assisted construction of modern ro-ro ports, the Chinese-assisted Northrail project, the rehabilitation of our airports, the Japanese assisted flood control and many others were arbitrarily junked. The massacre of major infra projects in 2010 and 2011 resulted in a sharp drop in our GDP growth rate in 2011.

All these were major infra projects. They might have broadened the asset base of our economy to underpin future growth. Their multiplier effects are massive.

The DAP mechanism converted economic investments into politically configured consumption. The money taken from infra projects was converted into pork barrel slush funds designed to strengthen the grip of the Liberal Party over our politics.

The profoundness of the crime committed cannot be overstated. It has substantially diminished the opportunities for sustainable growth of the next generation of Filipinos.

Today we feel the infrastructure constraints in various injurious forms.

The decrepit MRT system nearly took lives in yet another malfunction last Wednesday. Congestion of the Manila port traps tens of thousands of containers, depriving inputs for factories and, because of inefficiency, pushes up the inflation rate. The infernal traffic gridlock in the metro area wastes billions in fuel and lost man-hours. The international airport, unwisely named after the President’s father, is universally considered the worst in the world. The provincial airports are even more inferior.

We are all penalized daily by the crime of omission committed to build the DAP: the absent infrastructure, the absence of strategic planning, the inefficiency of domestic logistical systems that inflict an intolerably high food price regime on the poor, the time we waste trying to get from one point to the next in the city.

The infrastructure gap that constrains our economy widened rather than narrowed in the past four years. Understandably, the country’s standing in the UN Human Development Index plummeted the past few years.

We are descending too fast, we threaten to displace the Democratic Republic of the Congo. In addition, we are trying to approximate the sort of tyrannical government they have there.

Magno, Alex. The Philippine Star. Omission. August 16, 2014. Web. August 19, 2014. < www.philstar.com/opinion/2014/08/16/1358022/omission >

I don’t think Mr Magno is exaggerating. Things seem to be getting worse, not better.  It’s demotivating. Who feels like working hard and paying taxes when you have to brave Manila’s congested, polluted streets? No proper side walks, no anti-flood system, with roads ridden with pot holes? It’s survival of the fittest, one that leaves you stripped of your energy when you get to the office. Doesn’t anyone remember French history? Among the reasons for the revolution was the over taxation of the middle classes.  From Wikipedia :

The essence of the revolutionary situation which existed in France in the 1780s was the bankruptcy of the King, and hence the State. This economic crisis was due to the rapidly increasing costs of government and to the overwhelming costs incurred by fighting two major wars: the Seven Years’ War and the American Revolutionary War. These costs could not be met from the usual sources of state revenue. Since the 1770s, several attempts by different ministers to introduce financial stability had failed.The taxation system was burdensome upon the middle class and the more prosperous peasants, given that the nobles were largely able to exempt themselves from it. As a result, there was “an insistent demand” for reform of these abuses of privilege, for an equitable means of taxation and for improved government processes. David Thomson argued that the bourgoisie and peasantry had “something to lose, not merely something to gain” in their demands for a fairer society and this fear too was a major factor in the revolutionary situation

From SparkNotes :

Over taxation, a strategy of a country that is at the brink of collapse

Over taxation, a strategy of a country that is at the brink of collapse: the French revolition

From < www.sparknotes.com/history/european/frenchrev/section1.rhtml >

Severe inequality and the church having a big influence on politics. Sounds familiar?

Over taxation, a strategy of a country that is at the brink of collapse : Social Inequality, a cause of French revolution

Over taxation, a strategy of a country that is at the brink of collapse : Social Inequality, a cause of French revolution

Tell me I’m wrong.  I spent the whole morning today reading about taxes in Asian countries. Here’s what I came up with :

Income Tax Rates in Asian Countries

Over taxation, a strategy of a country that is at the brink of collapse

Over taxation, a strategy of a country that is at the brink of collapse

Fine. You might argue that Japan tops the list at 50% . But this is the ceiling, mind you. For top earners! It’s hard to interpret this without knowing how much one has to earn to be taxed this much. So I came up with this :
Top Marginal Rates in Asia

Over taxation, a strategy of a country that is at the brink of collapse : Income Tax Rates in Asia

Over taxation, a strategy of a country that is at the brink of collapse : Income Tax Rates in Asia

(You can click on the image and maximize it). The information came from KPMG.com. The local currency – USD conversion from Google. Now doesn’t that speak volumes about the type of taxation we have? Top earners in Japan get taxed 50%, but top earners by definition mean those who earn 174k USD/ year. That’s 15x more than what our folks must earn to be considered a “top earner”.

Here is a table showing the range for personal income tax rate and VAT / Sales tax. Based on this table, the Philippines ranks number four in the region at 12% (including China at 17%, New Zealand at 15% and India at 12.5%).

tax1

Let’s support Senator Angara in his proposal to lower the tax rates. I mean, if there isn’t anything to show for it, para san paAbuso na sila. At pigang piga na tayo.  

Over taxation, a strategy of a country that is at the brink of collapse : Middle Class, pigang piga na!

Over taxation, a strategy of a country that is at the brink of collapse : Middle Class, pigang piga na!

—Tax rates per country—

Tax Rate in Japan

Over taxation, a strategy of a country that is at the brink of collapse : Income Tax Rates in Japan

Over taxation, a strategy of a country that is at the brink of collapse : Income Tax Rates in Japan

Tax Rate in Malaysia

Over taxation, a strategy of a country that is at the brink of collapse : Income Tax Rates in Malaysia

Over taxation, a strategy of a country that is at the brink of collapse : Income Tax Rates in Malaysia

Tax Rate in Taiwan

Over taxation, a strategy of a country that is at the brink of collapse : Income Tax Rates in Taiwan

Over taxation, a strategy of a country that is at the brink of collapse : Income Tax Rates in Taiwan

Tax Rate in Thailand

Over taxation, a strategy of a country that is at the brink of collapse : Income Tax Rates in Thailand

Over taxation, a strategy of a country that is at the brink of collapse : Income Tax Rates in Thailand

Tax Rate in Indonesia

Over taxation, a strategy of a country that is at the brink of collapse : Income Tax Rates in Indonesia

Over taxation, a strategy of a country that is at the brink of collapse : Income Tax Rates in Indonesia

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6 comments on “Over taxation, a strategy of a country that is at the brink of collapse

  1. Joe America
    August 20, 2014

    The Philippines is obsessed with collecting money every possible way . . . except for those with the power and connections to escape.

    Incident 1. My wife had to attend a seminar in Manila (we lived in Zambales) that would teach her what it is like to travel to foreign lands. Spouses of aliens have this requirement to qualify for a passport. I couldn’t figure out the purpose for this, because the information was easily available or could be put in a pamphlet, and we were only going to Disneyland. Then I did the calculations and figured they earned about P 30 million from those seminars.

    Incident 2. I know the manager of a city’s tax collection operation in Mindanao. He says they don’t upgrade valuations on the landed (like from agriculture to residential, for example) because they would cause trouble in the next election.

    So you are right. When the government gets you over a barrel, they extort, and the middle class is easy pickings.

    • ikalwewe
      August 21, 2014

      Oh god. That seminar absolutely had no use for me! The only thing I remember was them telling us not to be “tricked” into signing divorce papers.

      The local bir unit in my town is so efficient, it’s irritating. Even before my mom opened her clinic, they had already sent her a notice. She wasn’t even making money yet, and they already wanted to take what wasn’t there! But when it’s you who needs something, you have no choice but to resign yourself to the slow wheels of bureaucracy….

      • Joe America
        August 22, 2014

        Haha, that’s right, you would have had to take that seminar, too. My wife never told me about the sneaky divorce instruction. 🙂 Stay wise and healthy and as wealthy as bir will allow.

    • ikalwewe
      August 25, 2014

      Thanks for the link. Everyone I know supports this bill, I hope it becomes a law soon. If not, then people will continue to leave the country in droves, in search of places with better conditions (less disparity in “upward mobility” as mr angara said) for honest workers. And all that’ll be left are the incredibly poor and the incredibly wealthy.

  2. Pingback: What does it meant to be fair? | When the nail sticks out

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This entry was posted on August 20, 2014 by in Philippine society, politics, Thoughts - Philippines and tagged , , , , .
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