What Can We Do with High Local Taxes in the Philippines?

By March 10, 2017Tax reform, Tax Savings
High local business taxes in the Philippines

High local business taxes in the Philippines

The proposed income tax reforms have been hogging the headlines lately. Based on the latest draft at end of February 2017, an annual basic salary of P250,000 that used to be taxed as high as P37,500, will now be ZERO (not a typo). Everyone can’t wait for this to happen. It’s about time to experience a tax REDUCTION for a change.

But while national taxes (e.g. income taxes) are getting all the media attention, there is set of taxes that are under the radar, and have risen significantly in recent years. I’m referring to city/municipal or “local” taxes.

WHAT ARE THESE LOCAL TAXES?

Many are familiar with the basic cedula or Community Tax Certificate (CTC) and the Professional or Occupational Tax Receipts (PTR and OTR) we pay annually at city hall, and these fees have relatively been steady. What has given businesses and residents much stress are the increasing business permit fees and real estate taxes. If you’re based in Quezon City you’d probably be feeling it right now, and for those in Manila, they would mostly likely say “welcome to the club”.

While properties do appreciate over time, for most families the increase in the value of their homes doesn’t improve their daily lives.  Higher real estate taxes, however, impact their budgets greatly and can be a considerable burden for some.

WHY DO LOCAL TAXES KEEP GOING UP?

Expenses for most cities and municipalities have gone up. And that is the simplest answer to why local taxes have too. Others argue that with the significant economic growth in recent years. The corresponding increase in the number of business establishments and property developments should provide local government units (LGUs) the needed additional sources of revenues. That LGUs would not need to further increase the fees and the local tax rates.

I’m not privy to the finances of LGUs. And without being cynical, many would agree that while there has been considerable progress, we are still far behind other developed countries. This means there is still quite a backlog in areas such as public education, health services, and infrastructure. For example, the cost of private education has risen so much that many more have moved to public schools. Recent statistics show that total public school population is at 21 million and students in private schools are now under three million.

WHAT TO DO WITH HIGHER LOCAL TAXES?

What if you had reluctantly paid for an expensive annual gym membership? You’d probably go to the gym more often if you’ve already paid upfront right? Sayang di ba? Rightfully so, since everyone wants to get their money’s worth.

Taxes are no different. The simplest action is to make sure we get the most out of the taxes we pay. This would require us being more proactive and us reaching out to our elected officials, from the tanod, the barangay chairman, district councilors, or even speaking with your congressman. Whether it’s about repairing or installing a streetlamp, requesting side streets be cleaned, or roads be repaired, everyone, especially taxpayers, have a right to demand better public service. And instead of shelling out thousands to install a CCTV, why not consider speaking with your barangay chairman about them installing one near your residence?

Getting your money’s worth also involves a change in mindset. I’m referring to those who may have a negative perception about public services. For many middle-class families, it’s a taboo to be visiting, say, the National Orthopedic Center and not a private hospital to get your lower back checked. Our Philhealth membership helps, but it’s likely that the bill will be much lower at a government hospital. And the very thought of sending your children to public schools? Now that would be sacrilegious. What would my friends and families say about me? How can I post pictures of my kids in (public) school on Facebook? But is everything “public” that bad? You’d be surprised to know that the Philippine General Hospital is a popular first choice among medical students for their residency. And graduating from a private school certainly doesn’t give one a free pass to the top universities in the country.

Many government facilities are in need of major repairs, but not all of them are that bad. It would do us no harm if we take a second look and not simply brush those aside. Would the lines be much longer in public hospitals? Mostly likely. But how about getting there early? It’s worth a try. And speaking from personal experience, the MRT is still a great option (outside of the rush hours, of course).

SO NO ACCOUNTING “TIPS”?

Well these are my two cents in dealing with high taxes. They have nothing to do with fancy accounting tricks (urban myth). But getting your money’s worth? That sure is the simplest and ethical solution to higher taxes.

For many middle-class families, let’s not limit ourselves to the free vaccination for pets at the barangay centers. Or applying for senior citizen card at city hall. Let us demand more out of our local taxes.  Consider taking advantage of all the government services available to us.

And if you’re someone who reluctantly paid for that gym membership, pack your stuff and head there now!

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