WITH deepening economic, health and education inequalities, the Philippines should overhaul its tax system to make the country’s wealthiest pay more, according to a study by Oxfam Pilipinas and Action for Economic Reforms (AER).
In their study titled ‘Inequality at a Breaking Point: A Call to Embed Equality in the Philippines’ Economic Agenda,’ economic constraints, malnutrition and underinvestment in education drive inequality in the Philippines.
The Philippines also remains one of the most unequal economies in Asean, with a Gini index of 40.7 in 2021, and significant disparities in wealth and income distribution, the study said.
‘While high growth has contributed to poverty reduction in East Asia, the Philippine experience highlights that growth alone is insufficient without equitable access to opportunities and strong redistributive policies,’ AER Executive Director Filomeno Sta. Ana III said.
As recommended in the study, progressive taxation targeting income, assets and wealth is the ‘most effective’ in achieving equity.
Although income taxation in the Philippines is theoretically progressive, the study said making progressive taxation truly effective depends on the government’s ability to obtain full information, particularly from the self-employed and other hard-to-tax groups.
‘Collecting the right taxes on assets and wealth is difficult to do, especially when State capacity is weak. It does not help that the Philippines has a very strict law on the confidentiality of bank accounts and deposits,’ the study said.
‘Relying solely on income and wealth taxes to generate the huge resources necessary for sustainable development is inadequate,’ it added.
Despite revenues generated from indirect taxation being substantial, the report said indirect taxation on the consumption of goods and services is regressive, with the tax burden mainly falling on the lower-income groups.
‘To ensure progressivity, tax revenues should fund public goods that primarily benefit the poor,’ the report added.
Apart from progressive taxation, the report recommended pursuing transformative reforms for sustainable and inclusive growth, such as transparency and accountability in public funds and projects.
The government should also invest in education and training, as well as the full implementation of the Universal Healthcare Law, with a focus on primary healthcare.
Oxfam Pilipinas Executive Director Lot Felizco said addressing multidimensional inequality should be a priority for the government and all institutions.
‘We need to reorient policymaking and programs to address inequality in all its forms: promote not just economic growth but pillars of sustainable development, such as health and education,’ Felizco said.