Online Referendum for Economic Freedom in The Philippines

Monday, January 17, 2011

Fiscal Aquino reform for 2011 or 2012

I have read somewhere that President Aquino is thinking to reform its fiscal system in different ways :
- Reducing VAT from 12% to 6%
- Leaving custom taxes on wheal and cement
- Increasing excise taxes on cigarettes, liquor, etc
- Asking local governments to increase land taxes

So my comments in the right order :

1- For the VAT, this is a big mistake what liberals are trying to do. Probably pushed by Mar Roxas who fighted against VAT by the past.
First of all, Philippines is suffering of debt and deficit, the priority then is to stop to vote deficit budgets, not making it worst.
Secondly, VAT is the best tax. The one who impact the least negatively the economy. I can explain it simply : it taxes all products, imported or local, without braking investment. Philippines with this tax can partially base its system on imported products. And contrary to custom taxes, VAT don't make people forced to pay for a non-competitive product.
Lastly, reducing VAT won't decrease prices. We experienced it already by the past in France. By reducing VAT, companies will just increase non-VAT prices. Moreover, this reduction will also push importation. The only one country who will win of this policy is the country who export here  but import less (Singapore, Thailand, China, Taiwan).
Every pinoy (not me, I am not...) should express its opposition to this tax project.

2- Leaving custom taxes on wheal and cement is a good idea. Because in long term it will decrease the price of these products. However, other custom taxes must to be slowly removed too. It corrupts all the competitivity of pinoy production (even if first these taxes pretends to protect them), making all prices more expensive by reducing offer. In this instance, I can just incitate liberal to pursue this custom tax policy.

3- Excise taxes on cigarettes and alcool don't shock me. However, Aquino should stop to base its system on excise taxes because as well as custom taxes, it corrupts the competitivity of the country. Better for him to change of policy, and choose to increase VAT to decrease excise and custom taxes.

4- Asking local governments to increase their land taxes is a good idea because immovable property taxes and all taxes around are not too bad for the economy, as well as VAT. However it is all the immovable property taxes who should be a bit increased.

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