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A ‘Taxing’ Endeavor

By Lorraine LorenzoAugust 20, 2017

‘ALL TAX REFORM IS MEASURED ON HOW WELL WE SPEND THE MONEY’

 

One would think that the Department of Finance (DOF) would appoint someone who looks more imposing to head a task that basically asks Filipinos to pay more for government expenditures. Instead, they assign Karl Kendrick Tiu Chua, a soft-spoken individual who looks more like a Koreanovela star than the Undersecretary for Strategy, Economics, and Results Group of the DOF.

However, it seems there is no need to call for such an aggressive character – Chua is a whiz when it comes to the country’s tax issues, and he has more than 10 years of experience as senior country economist of the World Bank for the Philippines. If that doesn’t impress you, his wit and charm would surely win you over.

These traits are actually important if you want to convince people that despite allegations of massive corruption in the government, they have never really collected enough revenues – and that there’s a valid need to collect more via the Tax Reform for Acceleration and Inclusion (TRAIN).

“The most difficult is convincing that the tax reform is really good for the people. Strategy is combination of good research and building reform coalition and door-to-door visit to Congressmen.”

Chua believes that the new tax reform program is an important tool for the government to achieve its 10-point socio-economic agenda by ensuring equitable and sustainable financing.

 

Pro-poor, anti-poor

In a nutshell, TRAIN or House Bill 5636 proposes exemption on income tax for the first P250,000 of income annually. In exchange, the money will come from increasing excise tax for a number of products with negative health and environmental impact like refined petroleum products, sugar-sweetened drinks and automobiles.

The proposed tax reform has elicited varied reactions from different sectors of society. Labor unions call the bill anti-poor as they deem the new law will make it harder for them to purchase products that they could actually afford. Chua, however, believes this new law is necessary.

“Collecting revenue is a priority. It cannot be set aside,” he explained. “We have to do all the reforms as a package – we can’t set aside the policy reform and just improve the collection of the BIR or the BOC because part of our tax problem is also in the law. We have a bad tax system and we need that to improve.”

Chua has been accused of being out-of-tune to the lives of the people he believes would benefit most from the bill – the poor.  And it’s easy to understand why: he finished a management engineering degree in 2000 at the Ateneo De Manila University, and took his master’s and doctoral degrees in economics at the University of the Philippines, serving as research assistant to the respected UP 11 group of economists that included Solita Monsod, Felipe Medalla and current budget and management secretary Benjamin Diokno. And with his past lucrative career at the World Bank, Chua isn’t exactly part of those living below the poverty line. So how can he tell what is best for the poor?

To answer this, it is best to look at the Undersecretary not as a successful career person with a pedigreed background, but rather as father to his only son, Keid, who was named after a star.

“If we want business as usual, if we just want the kind of life that we have now, then we don’t need a tax reform. But if we want a better future for our children, if we want better education, better jobs, better roads, better airports… Someone has to pay for it.” 

As an economist, with an extensive background in numbers (prior to joining the World Bank, he was assistant professorial lecturer of mathematics and economics at Ateneo, a consultant for several local and development partner-funded projects in the area of economic and fiscal policy, and a systems analyst for Andersen Consulting), he sees the new tax reform program as a necessary investment to improve the lives of 99 percent of Filipinos.

“The tax reform is an investment for our future. No investment is easy. In life, every one of us works hard in school or in our job to be successful. The same thing applies to tax reform. We have to work hard together to become more prosperous.” 

He further stressed that HB 5636 could change the game for other newly enacted laws like Republic Act 10931 (Universal Access to Quality Tertiary Education Act) and RA 10932 (The Anti- Hospital Deposit Law) as these could be implemented better with the support of the tax reform.

“If you do the tax reform, it will be easier to find money. If you don’t, it will be harder.”

 

Not all about the money

Overall, Chua also calls for fair play between the rich and the poor and the new tax reform law could be the catalyst to achieve just that.

 “In life, nothing is free,” he explained. “If I give you an exemption, I have to get it from someone who’s willing to pay, and most of the time it’s the poor who pays, because the services that they should get do not go to them.  For instance, if we give P300-billion worth of tax holidays to large corporations, then it’s only them and their employees who will also benefit from it. But this also means that the government will also lack P300 billion because of those tax reliefs – an amount that could have been used for K-12 education for public schools, universal healthcare, or farm-to-market roads. But it’s not there so that’s why we have to rebalance, and the tax reform is really about making opportunities more equal.”

As soon as House Bill 5636 gets enacted (it is expected to take full expect on January 1 next year), it could be an important measure that could tip the scale of the Duterte government’s economic success. Ironically, its measure of success is not on how much money the government will be able to collect.

“The tax is not the end of the whole reform,” he concluded. “In fact, all tax reform is measured on how well we spend the money, how that money will be returned back totally to the people in the form of better roads, better education, better health care, even housing. So in the end, even the non-tax payers will benefit because they will get social welfare. That’s how you say the government can be successful with this new tax reform. Not everything is all about money.”