Rich not paying enough taxes, research firm says

MOST of the rich Filipinos evade taxes, and many are members of civil society groups preaching compassion and demanding the rule of law, an official said yesterday.

“Rough calculations show that the top 10 percent may in fact be cheating grossly, paying less than one-seventh of what they should be paying,” said Romulo Virola, head of the National Statistical Coordination Board, the government’s main statistical agency.

“And many of them belong to civil society,” he said.

Virola was quoting statistics from his agency’s 2006 Family Income and Expenditure Survey, which shows that in 2003, only 0.66 percent of the total family income in the Philippines was paid as income tax.

The survey says the poorest 30 percent of Filipino families paid only 0.02 percent of their income as tax, while the top 10 percent paid only 2.49 percent.

“The richest 10 percent of families had an average annual income of P473,372 in 2003, but only P12,638 or 2.49 percent of that went to pay income tax,” Virola said.

In fact, he said, the richest 10 percent should have paid P104,712 or 22.12 percent of their income.

Income tax evasion has been growing even as the tax effort, or the ratio of taxes collected as a percentage of the gross domestic product, has been declining in the Philippines since 1997.

The ratio dipped to 12.4 percent in 2004 from a peak of 17.0 percent of GDP in 1997—although it improved to 14.0 percent in 2007—according to Rosario Manasan of the Philippine Institute for Development Studies.

The same ratio stood at 14.7 percent in the first three quarters of 2008, but the World Bank says it should reach 17 to 19 percent to enable the government to meet its expenditures.

The same Statistical Board survey shows that the Philippines’ richest families live in Metro Manila, Central Luzon and the so-called Calabarzon region comprising Cavite, Laguna, Batangas, Rizal and Quezon.

Metro Manila had the smallest share (1 percent) of families with incomes representing the bottom 30 percent, but had the largest share (35.2 percent) of families in the top 10 percent of income distribution.

Still, Calabarzon’s share of rich families has been increasing. It went up to 19.4 percent in 2003 from 16.9 percent in 2000 and 14.6 percent in 1997. Likewise, Central Luzon’s share of the elite rose to 10.2 percent in 2003 from 9.6 percent in 2000 and 9.3 percent in 1997.

By contrast, Western and Central Visayas had the largest share of and together accounted for about a fifth of the families in the bottom 30 percent. And Mindanao had the smallest share—less than 1 percent—of the families in the top 10 percent.–Roderick T. dela Cruz, Manila Standard Today