AAXS Hosts Tax Reform Forum – “The New Taxes and You”

by Mr. Reginald Yu, XS'84, AAXS President

For its inaugural endeavor, the new administration of the Alumni Association of Xavier School (AAXS) propitiously hosted “The New Taxes and You” – the first of a regular series of public service talks in its earnest efforts to raise public awareness and impact of the government’s proposed tax reform policies. The jam-packed affair attracted more than 400 alumni, faculty, guests, and friends who trooped to the Xavier Angelo King Multi-Purpose Center to hear the key proponents make their case to the public.

Fr. Aristotle C. Dy, SJ, addresses the crowd

Fr. Aristotle C. Dy, SJ, addresses the crowd

Xavier School President, Fr. Aristotle C. Dy, S.J. (’89) officiated the invocation, while 2017 Alumni Homecoming Chairman Ronald Tanco (XS’92) and 2017 Fund-Raising Project Chairman Allan G. Castro (’92) made a pitch for their up-and-coming “Art and Auto Show at Xavier School” before commencing the forum proper.

Under the Philippines’ current tax scheme, the personal income tax is among the most confiscatory in the world. Income tax rates are among the highest and the tax system touted as “the most uninviting and outdated” in the region. The serious problems that plague the tax structure – an income tax system that is unfair and inequitable; corporate taxation that is uncompetitive; redundancy of non-transparent fiscal incentives resulting in incalculable revenues forgone; and specific excise taxes that leads to revenue erosion – encourage more tax evasion, making tax administration one of the most burdensome in our region, a phenomenon has constantly bedeviled administration after administration in terms of tax compliance.

In a genuine effort to institute a just and ethical means of taxation, simplify the tax system and correct problems that render the country less competitive, the government initiated a new tax reform program which hopes to redesign the current tax system to be simpler, fairer, and more efficient for all, while raising the resources needed to invest in infrastructure and people-oriented programs.

At the very heart of this new tax reform measure – which currently faces a myriad of both commendation and condemnation – are two of the key figures central to the formulation of this program, both of whom are proud Xavier School alumni: Undersecretary Karl Kendrick Chua, from the Class of 1996, is the Chief Economist for the proposed Strategy, Economics and Results Group of the Department of Finance and is the lead advocate who helped formulate and write the tax reform plan; and member of the House of Representatives of the Philippines Dakila Cua “Dax” of the Lone District of Quirino Province, from the Class of 1995, is the Chairman of the House Ways and Means Committee and the acknowledged author of the “Tax Reform and Acceleration and Inclusion Act,” or more popularly known as “T.R.A.I.N.”

Undersecretary Karl Kendric Chua (XS'96) of the Department of Finance.

Undersecretary Karl Kendric Chua (XS’96) of the Department of Finance.

Undersecretary Chua embarked on a comprehensive presentation of the tax reform proposal. Couched in simplest terms, he outlined the most salient points of the measure’s “Package 1” (there are five Packages), to wit:

  1. SIMPLIFYING THE INCOME TAX BRACKETS BY DECREASING IT TO SIX. Under the new scheme, tax rates for 99% of taxpayers will gradually decrease over the next few years of implementation, which in turn, will increase the take-home pay of most individuals thereby putting more money in people’s pockets.
  2. IMPLEMENTING A FAIR VALUE-ADDED TAX (VAT) SYSTEM WITH A LOW RATE AND EXEMPTIONS LIMITED TO RAW FOOD, HEALTH AND EDUCATION. The Philippines currently has a VAT system with numerous exemptions leading to large leakages as people take advantage of the VAT system to pay less tax.
  3. INCREASING THE OIL EXCISE TAX. Oil excise is a highly progressive tax since those who consume more will pay more tax compared to those who consume less. Only the top 10% of Filipino households consume almost 51% of fuel. Additional revenues raised through an increased excise tax will be used to improve traffic management solutions and fund climate change-resilient infrastructure.

To mitigate the impact of higher oil excise:

  1. Targeted cash transfers will be made to the poorest 50% of households;
  2. Cash cards to Public Utility Vehicles will be given to stem any increase in fare rates;
  3. Subsidies will be offered to lifeline consumers in areas that use diesel or bunker fuel to power their communities;
  4. Social welfare cards will be used to help the poor receive social services; and,
  5. Subsidies to Public Utility Vehicles will be made to convert to more efficient engines and bodies.

The good undersecretary underpinned his talk with THREE (3) key takeaways:

  1. Tax reform, when seen as a PACKAGE, provides benefits to 99% of Filipinos;
  2. More important than the tax is how we spend the money to benefit poor Filipinos;
  3. Tax reform is an investment in our future. No investment is easy. There are short term challenges but everyone benefits in the long-term.

For his part, Congressman Cua made an impassioned appeal to support House Bill 5636 that he authored which encapsulates most of the pertinent details discussed by Undersecretary Chua. Speaking impromptu during the forum, he said that the “Tax Reform and Acceleration and Inclusion Act,” which provides for lower personal income taxes but higher excise tax of fuel, new cars and sugar, “shall correct the outdated system of the 1997 National Internal Revenue Code.” He rebutted concerns on inflation and pitched the most important features of the tax reform bill such as the lowering of personal income taxes and the revenue that will be generated from the package intended for social welfare and infrastructure programs of the administration.

Congressman Dakila Cua XS'95 of the lone district of Quirino Province

Congressman Dakila Cua XS’95 of the lone district of Quirino Province.

“As Xaverians, we have repeatedly been hammered with the motto of being ‘Men-for-Others’ by the Jesuits,” Congressman Cua declared. “We formulated this bill together with USec Karl and debated with this for a long time before we presented our case, always bearing in mind how we can offer the greatest good for the greatest number. And we believe this tax reform measure provides the necessary impetus to increase the revenue of the government that will be spent for social welfare, infrastructure, education, job creation and other programs for the country.”

During the Question-and-Answer portion, both speakers diffused fears repeatedly raised by some members of the audience over the proposed hike in the excise taxes of petroleum products, pointing out that the gradual increase over three years under the “3-2-1” formula is “actually a progressive measure as the top 10 percent of families consume 51 percent of fuel and transport costs, while the top one percent of families consume 13 percent.”

“The greater revenue that will be gained from taxing the rich will be used to fund social services and targeted transfers that benefit the poor,” Undersecretary Chua reiterated. “The gains will be greater than the losses, and the low-income Filipinos will benefit the most once the tax reform, the transfers, and the pro-poor spending program are taken together.”

A plaque of appreciation given to ANC anchor Ms. Catherine Yang as moderator of the talk

A plaque of appreciation given to ANC anchor Ms. Catherine Yang as moderator of the talk.

This forum was made even more meaningful with the welcome participation of one of the most recognized business journalists of our generation, Ms. Catherine Yang – ANC 24/7 News Channel’s Anchor and Managing Editor who adroitly moderated the two-hour forum with her unimpeachable brand of judicious inquisitiveness and a disarming presence on stage. Ms. Yang is a multi-awarded anchor who has worked in various news outfits across the Asia-Pacific Region over a span of 15 years, and her self-evident expertise has certainly helped make the most out of this two-hour symposium.

With a very successful maiden forum that served as its “litmus” test, the Alumni Association of Xavier School (AAXS) is ever committed to advance its organizational profile to become a genuinely relevant organization built on a solid network of cooperation and service for its more than 13,000-member strong alumni constituency.

Kudos to the Forum Committee, led by the indefatigable AAXS Trustee for Special Projects Wilson Lui Tan (’87), who left no stone unturned in ensuring the success of this major, maiden endeavor.

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