Make new tax law retroactive to May 1

This is my column today.

The price of oil rose over the weekend again. It has become a weekly occurrence in the last two months that many people seemed to have accepted the increases as inevitable. Even the media networks have stopped giving it prominent space in the news. Whereas before most newscasts would banner the Friday night price increases, giving it a screaming headline treatment, the increase over the weekend would have gone practically unheralded if not for the protest staged by the militants.

The general reaction is one of resignation, as in “there’s nothing we can do about it.” It is classical conditioning at work—when people are exposed to something with regularity, they get used to it. The reaction to the mass action of the militants is basically the same. Because they have been at it for the longest time, protesting against anything perceived as oppressive, most people have also learned to take these mass actions in stride—as just another one of those things that a restive political sector is wont to do every now and then.

This is sad because the militants do have a point: What exactly is this government doing to help Filipinos survive the runaway oil prices? Some ideas were floated around in the beginning, but nothing has come out of these. It seems the government seems content on just sitting around idly, simply watching the prices go up every weekend like it’s some kind of a nightmare that would eventually go away in time.

Over the weekend, the militants demanded that the government scrap the value-added tax levied on oil and increase minimum wages, among other things. We know these demands are counterproductive, but at least some people are doing some thinking, which seemingly cannot be said of the people who walk the corridors of power in this country.

It’s not wise to increase minimum wages at this time because what it would do is force companies to close shop or scale down operations. That would mean more jobless people. But there are certainly many things the government can do to help workers cope with the difficulties.

One immediate action is to make the law that exempts minimum wage earners from paying income taxes and which grants others increased tax exemptions effective Jan. 1. It won’t be much, but the reimbursement of at least P5,000 in taxes withheld from January to June already constitute a windfall to many. The truth is that many workers have already “spent” this expected savings when our leaders trumpeted the supposed benefits of the new law last May, so the decision to make the law retroactive to January would only be a token gesture of the government’s concern.

Over and above the actual amounts, it’s really the gesture that counts at this point. Things are already difficult for most people today, so the last thing this government should do is make them any more difficult. This holds true for companies as well who are now faced with an administrative nightmare, courtesy of the Bureau of Internal Revenue’s intransigence in upholding the technicalities of the new law, particularly on the date it becomes effective.

It’s also a matter of keeping commitments and promises made. When our senators, congressmen and certain government officials went to town last May bragging about how they’ve done workers in this country a great favor by pushing the tax law exempting minimum wage earners from having to pay income tax, they made it appear that the law was already effective. As I’ve written in a previous column, many unions in fact immediately fired off letters to their respective managements demanding reimbursement of taxes withheld during the first six months.

It appears now that all that crowing was really just papogi—an attempt to earn brownie points with the populace. As it turns out, all that strutting around like peacocks in heat was premature because the BIR still had to craft the implementing guidelines that would put the law into effect. It would have been better of course if the bureau were involved in the crafting of the law so that all the kinks in the implementation were ironed out before it was passed. But I guess everyone was so busy trying to become popular they left the messy details to the BIR to sort out.

The revenue bureau has now declared that the law was not retroactive to Jan. 1. What this means, simply, is that all the promised relief is not going to be enjoyed by workers anytime soon. Minimum wage earners cannot claim the full benefits from the new law for the whole year 2008 since the law only took effect yesterday, July 6, a full 16 days after its publication. Of course the bureau has its hands tied—it is constrained to follow the provision in the law that says it only becomes effective 16 days after its publication. Most, however, prefer to see vested interests in the whole decision. The BIR, after all, is under extreme pressure to meet revenue collection targets and lest we forget, income taxes withheld on income are the easiest to collect.

Despite claims that the new law is revenue-neutral since the shortfall in tax collection is supposedly easily offset by more vigilant tax collection efforts and from consumer spending, everyone knows that the BIR is bluffing. Of course there is an impact: it is guaranteed collection already lost.

It’s easy to accuse those who are up in arms against the BIR interpretation as greedy, impatient and unreasonable people. The new tax law becomes fully effective in 2009, after all. Why can’t we just be happy for half the benefits that can be enjoyed this year—isn’t half better than nothing?

The point is that this was not what our leaders crowed about when they did all that bragging when the law was passed. Besides, these are difficult times and people need relief now.
And like I said, it’s really not just about the tax exemption issue. There is also the administrative nightmare that companies are faced. The new law also grants changes in personal tax exemptions. Personal exemptions of single taxpayers have been increased to P50,000 from the usual P20,000-32,000. The deductions for each qualified dependent have also been increased from P8,000 to P25,000.

The bureau has come up with this latest wrinkle of prorating these exemptions for 2008. This is the first time that such a scheme has ever been done. What this means is that companies will have to do two kinds of computations, one for the first half of the year and another for the second half when the new tax law is deemed effective. And then companies will have to ensure that the deductions are zeroed out at the end of the year so that employees don’t have to pay anything. All these are relatively simpler to do given advances in computerization, but tell that to many small and medium enterprises who do these things manually. And lest we forget, more than 90 percent of businesses in this country are SMEs.

I know several organizations that are now preparing their respective positions on this latest tempest. They are hoping that public pressure will make the BIR see beyond the technicalities and make the law retroactive to January 1.

But does this government really need to disappoint more people at this time when most are already disaffected with it? At the end of the day, it’s about public perception, and the last thing this government needs is more people critical of its seeming apathy to their plight.

Comments

Anonymous said…
In the rush to legislate it seems that the simple matter of retroactive date application was overlooked by Congress. In previous increases in exemptions the law was made effective as of January 1st of the year of enactment. This time however, the notoriously intransigent, tunnel-visioned and bull-headed BIR has gone cutely technical on us and insists on pro-rating the exemptions as of the effectivity date of the new law. The BIR as matter of unwritten principle, is extremely averse to refunding what it has already collected from overburdened taxpayers like salaried employees. It is not even considering that it is already drowning in VAT collections on rising oil prices. Talk about a lack of empathy for the suffering taxpayer!

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