Consumers Domain
By Ian Seruelo

Taxing the hungry

 “ There's always somebody who is paid too much, and taxed too little - and it's always somebody else. ” -- Cullen Hightower

Increasing the Value Added Tax (VAT) from 10 to 12 percent is currently being pushed by Malacanang in Congress .   President Arroyo says this is an important part of the package of measures that will nurse the economy back to health . It aims to raise an additional P35 billion to beef up the fiscal position of the country.

We can remember that on August last year no less than the President of the republic admitted that the country is in a fiscal crisis. That declaration was then followed by a call for all to share the burden of saving the country from a deeper economic crisis.  

And the president's cabinet then came up with a package of reforms.   Sadly, most of those included in the said package seem to put the greatest burden to the already impoverished Filipinos.   Yup , this increase in VAT is part of Malacanang's solution.    

Well who will pay for this additional burden?   All of us! Rich or poor, young or old, we will all shoulder the additional 2% VAT.   The burden however will be heavier to the marginalized sectors as VAT is a form of an indirect taxation, which means that it is not based on one's income.  

This means the poor will have to shell out the same amount as the rich for every commodity or service paid for.   For logically this additional tax will simply be passed on to the prices of commodities and services.

A tax system which is primarily dependent on indirect taxation is a regressive tax system. And yes the biggest chunk of the government's current revenues come from VAT.   Now an increase in VAT is tantamount to taxing the hungry.

An increase in the VAT will further erode the purchasing capacity of millions of Filipino families who live below the poverty line.   Taxation is supposed to be a system of redistributing wealth but I don't think this government sees it that way.   I can't help but sigh to such cosmetic knee-jerk solutions of the government.  

Yes maybe it will create a better fiscal picture for the economy so that credit rating agencies such as Standard and Poor will consider giving the country a higher grade but cut the crap, who needs high ratings when your people go hungry!

This column would like to echo the calls below of the Freedom from Debt Coalition (FDC) for legislative action to give long term and meaningful solutions to our country's economic problems.

1.   Repeal of the Automatic Appropriations Provision for Debt Service.  

2. Investigation and audit of all past and present public debts; determine which are fraudulent, behest and onerous, and consequently repudiate such; and to apply appropriate sanctions against the erring parties, whether government or private entities.

3.   Ceiling on allocations for interest payments.

4. Tighter regulation of government borrowings and the awarding of sovereign guarantees and performance undertakings. Review and appropriate revisions to the Build-Operate-Transfer (BOT) Law.

5.   Establishment of effective mechanisms to ensure that freed resources from debt service will go to the delivery of much-needed basic services to the citizenry, especially the poor and marginalized sectors.