DEAR President Aquino:
Mr. President, there is no better opportunity to take over the reins of power than now. And yet, there is also no worse time to be president, than perhaps at this time that you have ascended to the top post of the land.
The negatives are obvious to any impartial observer. The government institutions are dysfunctional, and in dire need of a total overhaul. Let us take a look at the revenue colleting agencies, as a case in point.
A number of educated studies point to the obvious fact that there is a lot of leakage in the government’s revenue streams, owing to severe and rampant corruption in the various revenue collecting agencies. The estimates vary on the actual amounts lost, but the consensus is that they run to billions of pesos every year.
Before doing anything else with the tax system in the country, these leaks must first be plugged.
Already, advisers close to you are suggesting that, in order to reduce the budget deficit, you should raise taxes on both consumption and income. While these suggestions are well-intentioned, they are also ill-timed. How so? Ill-timed because these measures serve only to punish the law-abiding and honest taxpayers, as it lets those tax cheats off the hook.
Those who now religiously pay their taxes will be asked to give up even more of their hard earned money, while those who don’t will continue doing what they have always done – get away with not putting in their fair share. This is grossly unfair, and will not be tolerated by the many who have always given their due, myself included.
Mr. President, you have an experienced accountant as your chief revenue officer – use his expertise wisely. Companies have many, many tricks up their sleeves that they employ, in order to reduce their tax burden. They charge non-business expenses in their accounts, in order to lower their profits. They employ various “tax shelter” schemes with their employees, in order to give them the same net pay, at a lower gross cost to them. All these practices are so rampant and widespread, anyone who knows anything about the way most companies operate will be able to tell you these various tricks of the trade.
For small and mostly family-owned businesses, it gets even worse. Many of these do not keep proper books of account, and often resort to negotiating with tax inspectors about the amount they should be paying. Most end up paying less than a tenth of their actual obligation, and even less goes to the government, due to leakages going to the pockets of the people they have negotiated with.
It leaves a bad taste in the mouth when you know that as a salaried employee, you are paying way too much tax compared to most small and medium businesses out there. Yes we want to contribute to the development of this country by paying our share, but we must not be made to look like fools, as everybody else gets away with paying virtually nothing.
Mr. President, do not raise taxes before you improve the way they are collected. If you do, it will only be like pouring more water into a leaking jar, while the thieves and crooks in public service gleefully funnel it away, as quickly as it is being put in. (More next week.)
(http://asbb-foreignexchange.blogspot.com & http://twitter.com/asbbatuhan)