Raising Filipinos’ tax consciousness by improving public services

Paying amilyar, or real property tax, that is due on the first day of January each year, is a task performed by Filipino homeowners as a matter of civic duty. Amilyar is imposed on property owners by the local government unit (LGU) where such property is located. It is a colloquial Filipino term derived from the the Spanish word amillaramiento, which means assessment of a tax. This was imposed during the Spanish era; the datu or barangay head  collected tax in exchange for protection and security. Today, amilyar is collected to finance services rendered by the LGUs to residents and property owners.

Last year, the House of Representatives passed their version of the Real Property Valuation and Assessment Reform Act while the Senate is finalizing amendments to its own version. Eventual enactment of this law is seen by the Department of Finance as a source of significant improvements in tax collection.

Meanwhile, President Marcos  vetoed Section 8 of Republic Act No. 11976, or the Ease of Paying Taxes (EOPT) Act, which aimed to exempt micro-enterprises from deducting withholding taxes. The law classifies an enterprise as micro if its gross sales are less than ₱3 million. Passed by Congress last September, this new law aims to modernize taxation, promote tax compliance, attract foreign investments, and enhance the country’s competitiveness.

The exemption was rejected “due to the potential significant fiscal risk and negative impact on tax administration efficiency.” Malacañang said that if 50 percent of micro taxpayers do not comply, the exemption would cost the government ₱40.4 billion in 2024, equivalent to 0.15 percent of the gross domestic product. The total estimated foregone revenues from 2024 to 2028 amount to approximately ₱206.4 billion.

Recall that the country’s tax revenues were reduced significantly due to the steep economic recession brought on by the Covid-19 pandemic. These difficulties prevented the full fruition of expectations for increased tax revenues from the enactment of tax reforms during the previous administration.

Current efforts seek to improve the tax to gross domestic product (GDP) ratio of the country. According to the International Monetary Fund, the Philippines’ “tax effort is estimated to be only 75 percent as of 2021, among the lowest in Southeast Asia.”

The best way to raise tax consciousness — and increase tax collections — is to show tangible proof that taxpayers’ money is being put to good use in terms of government services that truly satisfy and respond to the people’s needs. Affordable and decent housing, efficient mass transport systems, well-paved roads in the cities as well as in the countryside, and security of homes and businesses are long-term aspirations seeking to be fulfilled. Provision of timely medical and health assistance, as well as adequate school facilities for obtaining quality education are equally important needs.

Elected officials know this only too well as they get periodic feedback from citizen voters on how effectively they are using taxpayers’ money in rendering essential public services.