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There is an Undeniable Perversion of the Philippine Tax System

I know that many of us are frustrated with the current Philippine Tax system, year after year we give part of our salary and part of our purchases to the government with the belief that they will use that to help the country, yet, nothing seems to get better. Well, I looked into the actual effects of the tax laws imposed upon us and unfortunately, it may just be exactly what you expect.

Observation:

The Philippines has had many attempts in recent years to reform our tax system, all of them with the promise of actually imposing proper change for the better, yet we are always left disappointed. So, looking into one of Rodrigo Duterte’s largest reforms, the TRAIN Law, what do we find? Well, exactly what you might expect. The biggest goal of the TRAIN Law was to lower income tax and by doing so, hopefully decrease poverty in the country. However, due to the increased prices in vital markets, overall effect on poverty ended up being a slight increase. While this did heighten economic activity, this mostly came from the highest income sectors of the population but at the cost of the welfare of marginalized groups as power consumption and carbon emissions both increased.

Insight:

So what does this mean for Philippine Tax reforms? Well, if you look at other attempts at reform in the Philippines, you begin to notice a trend. The taxes favor the rich while forsaking the poor. That’s a blunt way of saying but that truly is how it feels, beyond just the exorbitant amounts of courruption that occurs in the country, the very system itself is not optimally designed to give the lowest income families an opportunity for upward mobility. The lowest decile of Filipino families earn at most Php20,000 while also have the fewest avenues for tax relief when they actually need better social and economic services. Meanwhile, taxing the top 1.5% of Filipino families an addition 10-20% depending on their income, could raise up Php91,000,000,000. And all this only serves to continually trap these families in poverty, in gets increasing harder to pull yourself up from your bootstraps when the system itself  is weighing you down.

Learning:

Article VI, Section 28(1) of the 1987 Philippine Constitution states that “The rule of taxation shall be uniform and equitable. The Congress shall evolve a progressive system of taxation.”

And unfortunately, as it stands, the rule of taxation is not equitable and it needs to actually be progressive if that is ever going to change. Taxation is one among three inherent powers of the government and it is a necessary tool for the betterment of society and for the government to function. Yet, the current system perverses the true purpose of taxation, which is to “accumulate funds and  resources to promote  the welfare  of the  general  public  through projects  and  programs intended  by the designated authorities of the government.” And when that purpose is not being fulfilled, that means we are quite literally being scammed by our own government. I, for one, am not one to speak on this issue because I am very fortunately one of the people that the tax system benefits. But that also means that it is up to me and everyone like me to administer real change. We cannot just stand by and allow this to happen to our fellow Filipinos simply because it does not affect us, that makes us just as bad as those perpetrators. To quote a poem by Martin Niemöller - 

First they came for the Communists

And I did not speak out

Because I was not a Communist

Then they came for the Socialists

And I did not speak out

Because I was not a Socialist

Then they came for the trade unionists

And I did not speak out

Because I was not a trade unionist

Then they came for the Jews

And I did not speak out

Because I was not a Jew

Then they came for me

And there was no one left

To speak out for me

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The Debate on Charter Change is Impossible to Resolve

Observations:

I’ve spoken recently with several people from all sorts of backgrounds about their take on charter change, whether or not the constitution needs amending. And the answers so far have been divisive. Some say yes, that the constitution needs to keep up with the times and pointed out some issues that could be resolved by constitutional amendment. Others say no, it’s too risky and leaves the door open for exploitation or that the document is open-ended enough to be applicable today. Clearly, there are valid points on both sides and it seems that we may never know how good or bad it might be until it actually happens.

Insights:

It was interesting to see the differing perspectives I heard from those I talked to. One who worked a corporate job in banking compared it to a business, he believes that the requirements for a candidate of public office needs to be updated and that, like a business, you want only the most qualified people to run the country. Another opinion I heard a couple of times, especially from the more senior interviewees, was that the constitution itself was not the problem, but instead it was the politicians who are not doing their jobs well. That also seems to be a recurring concern, trust in the government is low and that even if they were to change it, there is a lot of worry that changes made are in their own interest rather than the betterment of the country.

Based on everything I heard, it’s easy to see why people are so divided on this. While I did hear a majority of people say that change was not necessary, it was still clear that the constitution is not by any means perfect. Furthermore, all of them, whether against or for, acknowledged the many failings that our current government still has.

Learnings:

Overall, this whole exercise made one thing very clear to me and it is like I said in the beginning. The question of charter change will never be answered until it actually happens, there are simply too many unknowns. Of course that can only mean one thing, whatever decision, or lack thereof, is made it must be done with utmost scrutiny and care. Above all else, these people live here and are affected by any decision that is made at the very top; failure is not an option because millions of Filipinos rely on them. Truly, the best decision to make is one that is made with the Filipino’s best interest at heart, Unfortunately, whatever happens, it seems that part of the equation is where most people today lose faith.

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Correcting Course on the Future of Philippine Economic Development

The Philippines has primarily been an agricultural nation for as long as any of us can remember, but should it remain that way? Recent data has shown us a new way forward, one of industrialization and greater focus on technology. What is the right way to proceed? Today, we discuss exactly that in this blog divided into three sections: Observation, Insights, and Learnings.

Observation:

One of the Philippines’ primary are agricultural products like fruits and rice, it has been this way for a very long time. But, something has changed in these last few years, among the nation’s largest export groups has been a steady growth in electronics and machinery. In fact a report by the Philippine Statistics Authority in March of this year has Electonic Products to be the far and away leader in exported products, and it is still growing. Given that, this puts the nation at a crossroads, grappling with the persistent question of its economic trajectory: should the nation prioritize agrarian reform, focusing on equitable land distribution and agricultural development, or should it aggressively pursue industrialization, aiming for manufacturing-led growth? It is not secret that the Philippines has long been an agrarian economy, but it has become abundantly clear that the contributions of the agriculture industry has steadily declined which has lead this nation to begin importing more than they’ve been exporting. However, history has taught us that rapid industrialization is not an easy path to economic growth, the benefits are often unevenly distributed and leaves many people in rural areas, of which there are a lot of in the Philippines, marginalized and left behind. 

Insight:

In my view, it is not so simple as choosing one or the other, it’s clear that both have their own advantages and disadvantages; the real fire is finding the best of both worlds as most sustainable developed nations do. Agrarian reform is and always will be a great possibility in this country, but that opportunity has not always been taken advantage of in times past. But, when implemented genuinely, it can empower rural communities, enhance food security, and make the nation more self-sufficient. Industrialization on the other hand may be able to take advantage of more burgeoning and modern markets, we can already see that in the current data and the demand of electronic parts and products show no sign of slowing either. This could be the right pathway to take in order to keep up with current markets. Put together, industrialization can serve its part by providing a needed economic boost for the country, at the same time that boost is not going to last very long if the country cannot sustain itself and its people are unable to avail themselves of these new opportunities. Agricultural reform can help with both as well as provide a true service to the country.

Learning:

The Philippine economic narrative is not a zero-sum game and a binary choice will only leave one side underdeveloped. I have always believed in compromise, that the path forwards always exists somewhere in the middle. The biggest question behind all of this is how effective and appropriate the policies and people behind such movements are. Ideally, the result will be an interconnected system where agriculture supports industrialization and vice-versa. Of course, all this is simply wishful thinking for now and true change requires years to implement and even longer to become permanent, but we have seen examples of this in the past. Nations like Japan and Korea have both benefitted from systems like this, beginning with agrarian reform that in turn boosts a burgeoning industrial sector. In all fairness, these systems were implemented much earlier and the change in times have potentially changed the effectiveness of this kind of plan but it is still proof that there is hope.

Sources:

Conquest, R. (2019). Soviet Union - Industrialization, 1929–34 | Britannica. In Encyclopædia Britannica. https://www.britannica.com/place/Soviet-Union/Industrialization-1929-34

Department of Agrarian Reform. (2016). Agrarian Reform History | Department of Agrarian Reform. Dar.gov.ph. https://www.dar.gov.ph/agrarian-reform-history

Philippine Statistics Authority. (2025, March 28). Highlights of the Philippine Export and Import | Philippine Statistics Authority | Republic of the Philippines. Psa.gov.ph. https://psa.gov.ph/statistics/export-import/monthly

TradeImeX. (2024, August 6). Top Agricultural Import & Export Products of the Philippines in 2024. Infinite. https://tradeimex.in/blogs/philippines-top-agricultural-imports-exports