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Beating the TRAIN

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By Milwida M. Guevara

Milwida M. Guevara

Milwida M. Guevara

The sign “Pay as you Order” stands prominently on the walls of the cafe that I patronize.  This is how the owner ensures that every coffee and sandwiches are paid for.  No free rider is allowed.

This is how it should be with public services. We must pay for what we consume. Roads, traffic enforcers, traffic lights, the justice system – even the services of people whom we can do without in government are not provided for free.  We will be a lot happier to pay taxes if only there is a way where we can pay for the public goods and services that we like. But this is not how it goes.  Many services cannot be priced because we cannot exclude those who are not willing to pay for them.  We cannot turn off the street lights or close bridges to prevent tax evaders, avoiders, or corrupt officials from using them. This is why we pay taxes. They are our payments for public goods and services that we use.

Ideally, only the poor should be excluded from paying taxes. They have almost nothing in life and they need help by giving them access to free education, and health services.  However, our tax system does not stick to this rule and provides exemption and preferential rates to a variety of activities.  Preferential treatment is given in the guise of policy objectives, and, it is always easy to find one.  A sector or an activity can be described as rendering valuable service to the country and deserving of a tax relief.

The TRAIN corrects some of the infirmities in the tax system but adds some more.  By opening more gaps, there are various ways by which taxpayers can get ahead of the station before the TRAIN does.

  1. It is better to incorporate than to run a business as an individual. The highest rate on individual taxpayers will be 35% compared to 30% if he incorporates. If he pays himself in the form of a dividend, instead of wages, his tax burden will even be lower at 10%.
  2. It is even better to organize the business into a cooperative. Cooperatives remain exempt from income taxation, including the VAT — except for electric cooperatives whose exemption has been withdrawn.
  3. I cannot understand the preferential treatment for pickups. The TRAIN exempts them from excise taxation. Could it be that some lawmakers are in the pickup business (pun not intended)? But, nevertheless, shift your preference for pick- ups to escape the excise tax.
  4. For taxpayers going to the great beyond, postpone the date until the Implementing Rules are formulated. The transfer tax has been lowered from 20% to 6%. Plus, the deductions have been brought up to P5.0 million pesos. And, several tax reliefs are given – family homes valued at P10.0 million are exempt, and the tax can be paid by the heirs in installment within a two-year period.
  5. Postpone giving donations until next year. The donor’s tax has been lowered from 20% to 6%. Now it does not make a difference if you transfer your wealth while you are alive or when you have gone to the great beyond.
  6. Do not rent houses for more than P15,000 a month – otherwise the rent will be subject to VAT. Do not buy houses that are more than P2.0 million. Buy adjoining  units that are P2.0 million each to escape the VAT.  And then later, connect the houses or rebuild them to give way to a much bigger house.
  7. If you must get sick, choose diabetes and hypertension over cancer. Prescription medicine for these ailments is VAT exempt.
  8. If you have not converted the engine of your motor vehicle to diesel, do so now. The preferential rate for diesel remains. Compare P2.50 per liter with P7.00 on unleaded gasoline in 2018.  And stick with diesel, by 2020, the tax rate will be at P4.50 compared to P10.00 for unleaded gas.
  9. There is even a bigger advantage for cars powered by LPG. The tax rate is only P1.00 and will remain at P2.00 in 2020.
  10. And, start patronizing tea and coffee from Starbucks, UCC, Bo’s, Coffee Bean, among others. The sweetened beverages that are prepared in these cafes will not be subject to the excise tax. Of course, it would be better to drink mineral water, including Evian and Pellegrino.  They are not subject to excise tax.  Beverages that are sweetened by sugar from coconut are also free from tax.
  11. But the biggest winners are producers of motor vehicles. The excise tax rate has been lowered on those that are priced above P600,000. They used to be subject to rates ranging from 20% to 60%.   Now the tax rate has been lowered to 10% -50%.   I wonder why.

Indeed some are more blessed than the others when it comes to public policies.

But we are grateful that Christmas blessings are given without biases.  The rain falls on the just and the unjust.  And the good Lord loves the Sinner and the Saint.

mguevara@synergeia.org.ph

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