Senator Juan Ponce Enrile cannot be wrong. How can he be wrong when he rewrote the entire National Internal Revenue Code (NIRC) in 1996? Since the Comprehensive Tax Reform Program (CTRP) was chopped up in several pieces, the Senator rewrote the Code so that the reforms can be understood as a whole.
The Senator says the tax applies to the estate and not to individual members of the Marcos family. He is correct. The Tax Code levies the tax on the transfer of the net estate based on its value. The executor or administrator is required to file a return and pay the tax within six months from the death of a decedent, or the person who passed on the estate. The estate tax rates used to be progressive with a maximum of 35% in 1977. This was lowered to 20% in 1996 and further reduced to 6% under the TRAIN law. I will leave it to Senator Enrile to interpret the law and will limit myself to its intent.
There are opposite views on the inheritance tax. There are those who consider the tax as grossly unfair. They counter that the inheritance that is passed on to the heirs had already been taxed. But many of us (especially Thomas Pikkety) see the tax as a powerful instrument in bringing about fairness. There is certainly no justice when nearly 50 percent of the world’s wealth is held by the richest 1 percent.
The skewed distribution of income and wealth in the Philippines is a basket case of injustice. The richest families in our country control 36% of our nation’s total assets leaving only 1.9 percent to the lowest income class. It is just like giving a very big slice to the “rich and famous” while the very poor have to slug it out to snatch a pittance.
The control of a nation’s wealth by a very few results in serious consequences. Power and control of government and the economy are in a very few hands. Policies affecting the nation are decided by a very small minority. And in all likelihood, the policies and programs that they will formulate will protect the interests of their families and friends.
We see the effects of unjust distribution of wealth every day. The family names of leaders in Congress have remained the same through the years. They are the heirs of those who held power decades after decade. This is also the case with respect to owners of conglomerates. The nouveau riche are more of an exception rather than the rule.
And then, there are 37.64 million Filipinos who barely have food on the table. Many of them do not have roofs on their heads. In the metropolis, they sleep on pavements. Yesterday, a man selling food on a bicycle told me he just lost his wife and baby. With only a “hilot” in attendance, there was no chance for them to survive a breach delivery.
Common sense tells us that more equal societies will always do better. Studies confirm that equal societies are generally happier, more peaceful and with lower incidences of social problems like crime and violence. J. Stiglitz explains that equal societies have healthier democracies. A small elite cannot corrupt political institutions because of a huge base of educated citizens who will demand accountability from those in office.
But without a strong policy in income redistribution, inequity will be intergenerational. Those who were born rich will always be rich because of a head start. They will be several paces ahead of their peers because of their inheritance. And the poor are left with unequal opportunities in education and health and will find it very difficult to reach their potential.
The income tax has lost its potential in income redistribution. This is because of the preponderance of tax avoidance and tax evasion. Incomes are not declared and under declared. Deductions on the other hand are overstated. The informal economy remains untaxed. There are transfer pricing practices and the use of tax havens. We do not even need to go far because incomes and revenues can legitimately escape taxation if a business locates in economic zones. And of course, despite CREATE, tax exemptions can be generously given to those who are “preferred.” I do not even need to discuss the perennial problems in corruption and inefficiencies of our collecting agencies.
The estate or inheritance tax can be used to reverse the growing inequalities in our country. A part of the inheritance can be taxed by government and the revenues can be redistributed so that the poor can have more. This is the challenge for the new government. But this can only be made possible if we elect candidates who have a genuine love for the poor and recognize their calling to free them from bondage.
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