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Wednesday, June 28, 2006
Osmeña: Time to get rid of estate tax
By Antonio V. Osmeña
Estatements
Shelter, along with food and clothing, have always been recognized as essential to human welfare.
The division and mechanization of labor, the discovery of electricity, and the invention of the television, telephone and internal combustion engine have made possible the rapid industrialization and urbanization of the Philippine economy. The rapid shift from diversified farming to manufacturing and commerce has caused an equally rapid movement of population from farming region to urban centers.
Since 1945, when industrialization and commercialization began in earnest, the urban population has increased nearly 10-fold and outnumbered the rural population. Because of the relative fixity of land and the immobility of housing, the sudden migration—that is, the internal shifting of population—brought about a serious imbalance in local and regional housing supply and demand.
The necessity to provide shelter for the population caused cities to grow sporadically. Changes in social and political attitudes influenced people to seek shelter. Today millions of urban workers have availed of long-term real estate financing, thus allowing middle income families to own a home. The widespread use of the long-term amortization mortgage at high loan-to-value ratios has brought about a significant evolution in the distribution and acquisition of owner-occupied homes.
There was a time, hardly a few decades ago, when only those who had accumulated substantial savings could afford the risk which home ownership entailed. It was the necessity to purchase homes largely out of “savings” that placed home ownership out of reach of millions of Filipino families that are otherwise potential purchasers.
Today, a home, like any other consumer good, may be purchased on mortgage, based on stability of future income rather than on accumulated savings.
ESTATE TAX. Rep. Raul del Mar should look into the possibility of getting rid of estate tax. The government taxes the estate of the deceased. The estate tax will eventually affect the millions of middle income homeowners who are, like everybody else, mortal.
It is about time Congress has an honest debate about estate and inheritance taxes. Several countries like Sweden, Italy, Australia and Canada have abolished them. The trouble is that Congress has had no such debate.
Disinformation and distortion obstruct all sensible tax reform. Critics say that estate tax is “death tax,” an unfair and ghoulish levy that forces liquidation of countless middle income homeowners and small business. The Philippines has had this tax, a levy on the transfer of large fortunes between generations, since 1916.
The estate tax is meritocratic. It was introduced then to avoid excessive concentration of wealth on a few, a rationale barely mentioned in present debates. Perhaps the competitiveness of the global economy will prevent today’s fortunes becoming entrenched.
The estate tax, in short, is no longer ideal in the present Philippine population. American President Teddy Roosevelt argued in favor of estate tax to prevent the transmission of vast fortunes between generations that threatened to create a permanent aristocracy and, moreover, ruined the characters of the undeserving heirs.
Today huge farm landholdings have been awarded to tenants, and urban land has been subdivided and sold to the middle income families. So it is time to forever get rid of the estate tax.
For Bisaya stories from Cebu. Click here. (June 28, 2006 issue)
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