Recently, the Duterte administration announced that it would reduce both corporate and personal income taxes. Although this move is welcomed by most people, I am concerned at how this will affect our budget as a nation.
Further, most law makers have been pushing for several tax incentives. Some of them are the famous bill to reduce taxes for starting businesses less than 3 years and another recent bill to reduce estate taxes (taxes paid upon death). Most law makers seem to enjoy scraping out taxes to enhance their image with the voting public.
There seems to be a disconnect. The president wants to provide better and faster service in the government. We all know that this requires hiring people and improving existing technology. This requires tax money. But oddly enough, the government is also pushing to lower both income and estate tax.
REDUCE ONE TAX, INCREASE THE OTHER Unfortunately we live in a world of reality. We cannot have the best of both worlds. We have to chose one and sacrifice the other. I believe the best way to improve government services would be to improve tax collection and reduce corruption. We cannot reduce taxes altogether and improve government services. We should reduce income tax and increase estate tax to cover up for lost income.
HIGHER ESTATE TAX LEADS TO A MORE PRODUCTIVE SOCIETY Estate taxes are taxes paid on the value of the inheritance left by the deceased. Meaning in order to receive the cash or property left by your parents when they die you should pay an Estate Tax after their death. Take for example the sons of the billionaires in China where their sons no longer work but drive fancy cars and involve themselves in several immoral activities because anyway their parents are rich and they will receive a large inheritance in the future.
TOO MUCH TAX ON THE LIVING, TOO LITTLE TAX ON THE DEAD Currently our estate tax rate is at 20%. Our current income taxes is at 32% plus 12% vat or a total of 44% tax taken from us by the government while we are alive. For me we should allow the people who earned the income to enjoy more of it by paying less taxes while alive and paying more when dead. What would you want paying 20% tax while alive and paying 44% estate tax upon death or our current taxes of paying 44% while alive and 20% upon death?
FINAL THOUGHTS While I believe that our beloved president can do wonders for our nation, I also believe that taxes are the lifeblood of our government. If we are to have better services from the government, it must not reduce both income and estate taxes. The government must tax the living less and tax the dead more. This way, the sons and daughters of the billionaires will also work as we normal citizens do and be productive and useful members of society.
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Mark Joseph T. Fernandez, CPA, RFC, AFA, AWP, AEP, MDRT is the founder and head financial advisor of FinancePH. He has helped thousands of people start saving, investing and insuring. He conducts regular monthly seminars and is a regular TV and radio guest on finance topics.
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