No implementing rules for new tax law

This was my column last Wednesday, June 25, 2008.

The problem with media hype, or any kind of hype for that matter, is that because it focuses on the larger issues and disregards the fine print, it creates mistaken assumptions and often, unreasonable expectations.

When proponents of the latest law exempting minimum wage earners from paying income tax went to town to brag about how they should be nominated for sainthood for providing a lifeline to the two million minimum wage earners in this country, they created expectations that may not be met by the new law immediately.

Many workers are in for a major disappointment.

I am not just talking about the militant labor sector which, of course, will never be happy with anything the government does. The reason is ideological—they want a different system. Bayan already doused water on the jubilation by pointing out that the benefits provided by the law were insignificant. According to Arnold Pineda of Bayan’s public information department: “All of us are affected by high prices. Savings from tax exemption will be rendered insignificant by runaway increases in prices of basic commodities and services. And what about relief for the unemployed who are hardest hit by the surge in prices?”

Of course, the net benefit of around P35 a day, or P750 a month, which the law grants to minimum wage earners as additional take home pay is nothing to sneeze at. It’s definitely better than nothing. Thirty-five pesos a day translates to a kilo of government-supplied rice, a few pieces of dried fish, and probably some vegetables - enough to feed a small family one whole meal.

As someone who is part of the working class—the people who are automatically deducted income taxes while big businessmen and a number of professionals who earn much more get away without having to pay the correct taxes on what they make—I certainly think it’s about time some tax relief is given to the working sector.

Decreasing taxes, on in the case of minimum wage earners—not making them pay income tax at all—is better than doling out cash in exchange for nothing, which, in case you haven’t heard, is the government’s latest madcap idea. No, I am not against helping out people, am just against the idea of helping people become more indolent. There are many jobs government can create for people— planting trees, promoting waste segregation, patroling streets at night, etc.

And oh please, let’s cut the crap about how the shortfall in tax revenues will affect the national budget. The shortfall can easily be covered by a more efficient tax and vigilant tax collection system. In fact, I think that the government is paying too much attention on income taxes rather than on consumer and other sources of taxation.

So yes, the new tax law should be a welcome relief to millions of Filipinos. The self-congratulatory mood of our legislators and our government officials may be justified. Unfortunately, it seems the jubilation was not shared by the rest of the government bureaucracy who have been dragging their feet making sure that the law is implemented.

The media hype on the new tax law implied that workers would get the benefit pronto. This is farthest from the truth, of course. The reality is that as of this writing, the Bureau of Internal Revenue still has to release the implementing rules and guidelines which should guide compliance with the new law. Without the rules and guidelines, corporations and business entities cannot implement the new law.

In fact, in the week that our government and legislators were making a field day about the passage and eventual signing of the bill into law by the President, there was a mad scramble to get a copy of the law. In many of the human resource management email groups that I subscribe to, the recurring request for several days was for someone—anyone—to please post a copy of the new law. No one had access to it.

Someone finally got access to a copy of the Senate Bill, but no one could verify if that version of the bill was the one that was adopted, or if it was adapted in full without revisions.

We all had to rely on what was being reported by media. Unfortunately, we cannot implement changes in compensation tables based on news reports. To begin with, many of the reports were shot through with wrong assumptions.

For example, one daily said that the new law “exempts minimum wage earners from filing income tax returns.” We know that the law exempts minimum wage earners not simply from filing tax returns but from paying income taxes. Besides, most employees who are deducted withholding taxes have not been required to file income tax returns for quite sometime now, particularly if these tax obligations have been already been covered by their withholding taxes.

Because of the hype, many workers already began spending the expected windfall even before they could get their hands on it. I know of at least four unions who immediately fired off demand letters to their management to reimburse employees the taxes already withheld from them since January.

The media reports never mentioned anything about the date the law becomes effective —is it retroactive to January, or only on July 6, which is 15 days from the time the law was published? Has the government set a new tax table to accommodate the changes in personal exemptions? Considering that minimum wages are not uniform all throughout the country (each region has a different minimum wage), has the government set a ceiling figure for the computation? This is critical for many companies who operate in many places all over the country.

There are many more questions that remain unanswered and which has delayed the implementation of the law because like I said, there are no implementing rules yet. As usual, the speed at which our government leaders and legislators made promises was not in sync with the capability of the bureaucracy to deliver.

To cut a long story short, contrary to what our government leaders and legislators have been crowing about, there is no way that workers will receive this tax exemption anytime soon. Not without the implementing rules. And certainly not until all the kinks and confusion have been sorted out.


Twin-Skies said…
And yet see how efficiently our politicians work when the said "mad scramble" is for RAISING taxes.

Betcha they're going to huff and puff about this matter...even as they reserve hotel rooms and other whatnot at the event site where Manny's bout will be taking place this Sunday.

Taxes - the only legalized for of theft.
Bong C. Austero said…
you are right, of course. although, this time, because it makes them look like bleeding hearts, they've been crowing about how they worked hard to ensure the passage of the bill.

actually, i think a better system is not to tax income tax at all but to focus on better and more efficient consumer taxation, particularly luxury items.

anyway, thanks for reading.

deuts said…
I too would like to see a copy of the law, and scrutinize it. I still have to see an adjustment to the progressive tax table as I mentioned in my blog.

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