Are Taxes Evil?

by Anthony Alden S. Aguilar

!Taxes are the fuel that makes civilizations run. How we tax and spend determines to a large

extent whether we are prosperous or poor, free or enslaved, and most importantly, good or
evil.
- Charles Adams, For Good or Evil: The Impact of Taxes on the Course of Civilization
Almost everyone has an opinion on taxes. For most part, those who have jobs will call
taxes pabigat (burden), a nuisance, or even evil. Well, who could blame them? Everyone
wants to see something, some kind of big change or a tangible proof that their taxes are
working for them. Apparently, the signs that declare 'Your taxes are working for you' goes
ignored, especially if one's taxes cause traffic problems for a year, thanks to a new road
rebuilding project. It seems that considering a lot of things, tax comes off as both a major and
a minor inconvenience that we have to handle.
Does tax even have a trickle-down effect on those who need it most? Where is the
progress and development we have all been waiting for all these years? It seems like our
taxes are just a cause of misery, more than progress. In fact, when have you ever heard an
everyday worker praise taxes or say that it is something that brings more harm than good?
Taxation is one of the most notorious powers of a governing body. It has been viewed
as an oppression of sorts, especially by those who are struggling to make ends meet or those
who are just violently opposed to the idea of having a tax system. Historically, taxes have
caused all sorts of controversies, revolts, and protests. Even Jesus was not spared from tax: he
was even questioned whether he found it necessary or not.
Taxation has always been present in governments and civilizations, whether huge or
tiny. Taxes were originally a communal fund that is intended to be spent on persons or items
that would help defend the town or village against invaders. Taxes were also originally meant
to help support the royals or the state officials. The plebians or those who belong to the lower
class were the ones who paid taxes or levies that have been imposed upon them.
Ancient Mayans imposed tax laws that made some members of communities to exile
themselves in the jungle in order to escape paying their dues. Note that taxes at this time were
not monetary, but rather were in the form of goods or services. Therefore, farmers with low
crop yields have to harvest for business as well as for payment to their village officials, which
is quite a burden. Ancient Rome has several tax laws that have caused unrest in the populace.
With its systematic categorization of tax laws and levies, the Roman empire has been built on
war and taxes. The empire's taxes were initally collected from those who lived in Rome, but
thanks to conquest, the tax burden was transferred to the provinces Rome conquered. It is this
issue, in fact, that Jesus was asked. In the 11th century, a woman pleaded to her husband to
remove a burdensome tax called the Heregeld from the dues of those who lived in Coventry.
Lady Godiva, it was said, bargained with her husband, the Earl of Mercia that if she rode
through the town naked, he would lower the levies he has imposed upon those he governed.
Since his wife rode through town with only her long golden hair covering her body, the earl
removed the oppressive tax. There are several other historical situations where taxes caused a
furor, indignation, anger, and a strange event like that in Mercia. Ancient civilizations have
been the first to feel the burden taxes carried and they are certainly not the last. Unless

governments find another way to create income and bulk up their coffers, taxes are here to
stay.
What is taxation exactly? Does it really have a purpose?
Taxes are imposed upon an individual, a business, a property by a state or an equivalent of
one. Taxes are inescapable: from the goods you buy to the money you earn, taxes are almost
always included in everything you do. There are several kinds of taxes that could be broken
down in two categories: direct and indirect kinds of taxes. The direct kind of taxes are the
ones that you are obliged to pay monthly like income tax. On the other hand, taxes that are
imposed indirectly are the ones that you only pay when you purchase specific goods or
services.
Taxes are the lifeblood of a state. Everything from infrastructures to books in public schools
are covered by what very Filipino citizen pays as tax. Tax rates and payments are adjusted
according to one's capacity to pay and the amount of his or her income. This way, every
person has, in theory, an equal and fair contribution. Taxes help fund several government
projects that are aimed towards improvement of social conditions. The government's justice
system, police power, and social functions all lean heavily on the taxes that Filipinos pay,
whether direct or indirect. With what they gather every year, the government allocates a
budget for different sectors. Taxes go to building roads, the education system, welfare, and
subsidies among others. The funds from taxes provide the social projects and services to
citizens of a state or members of a group where the taxes are imposed.
4 Rs of Taxation
Taxation's purpose and effects could be summarized by four R's: revenue, redistribution,
repricing, and representation, with the first category being the main purpose of having taxes.
Revenue is the most popularly known function of taxes, and most likely, the most
controversial part of it, thanks to allegations of bad allocation and corruption. In theory,
however, a good tax system is one that aims to provide social services and benefits to
taxpayers, instead of benefiting the pockets of those who are supposed to be looking out for
the public's good and interests.
Theoretically, the taxation system in the Philippines makes those who have more money pay
more taxes while those who are not so well off have smaller income taxes to pay. This way,
tax becomes an equal burden to everyone, regardless of social status or income bracket. Taxes
aim to redistribute wealth, if not benefits the rich enjoy, to those who are disenfranchised. It
is this goal that taxes are used to finance social projects that would benefit those who are not
well off, which comprise the majority in the Philippines. With a large public sector, it is very
important for the government, through the Bureau of Internal Revenue, to collect tax
revenues in order to funnel them into social projects as well as debt payment. This also means
that we need a governing entity that knows how to allocate budget and spending to projects
and efforts that will promote development and economic stability.
The Asian Economic Crisis did not spare the Philippines as local economy struggled
alongside its neighbors. Though almost economy in Southeast Asia plummeted, the
Philippine economy showed some resilience as it managed to struggle and stay afloat while
residents tried to make ends meet as prices soared and dollar rates ballooned to almost double
the regular amount. Manila was hit so hard that the Central Bank of the Philippines needed to

be resurrected as the Bangko Sentral ng Pilipinas in order to protect the peso and the local
economy from going to a downward spiral the way Bangkok's and Jakarta's did.
The recent world economic crisis has, again, tested the Philippine economy. The government
has increased budget spending in order to help stimulate micro-economies into thriving in
spite of the recession that is happening worldwide. The administration has started laborintensive projects that highlight small infrastructures, a move that has a two-pronged
objective: to kick start small economies and to help increase tax revenue. The recent projects
have also seen roads built, irrigation systems improved, and community initiatives supported.
However, has this been enough to see growth and development in these areas? Clearly, tax
revenues have been used in such projects but has the nation even felt a slight improvement?
There are still complaints from farmers who suffer from low yields and the crush brought
about by imported rice. There are still schools that complain about a growing number of
students every year but a dwindling amount of quality educational materials and resources.
And there are those who still point to what happened during Ondoy: a tragedy that could have
been prevented if local government units had enough resources to rescue civilians as well as
fund government projects that would have created better ways of handling a strong typhoon.
And thus, the situation has begged the question: are tax revenues so low that it has
incapacitated local governments from doing their jobs? Getting the answer to this query may
be a bit tricky.
The Philippines' budget deficit is at a tipping point, so to speak. The country has borrowed
heavily from local and international bodies in order to finance its projects as well as pay off
previous debts that are years old. Local borrowing has reached P3,022 Billion while
international borrowing is slightly lower at P238.5 billion. With this, factor in a decrease in
tax collection revenues and you have trouble brewing.
Not only has the deficit been caused by debt and debt payment, laws have also caused tax
revenues to drop. The recent changes in income tax brackets as well as laws that give
companies tax benefits may have given individuals more room to breathe but they have,
ironically, created problems for the national budget. Income taxes have dropped thanks to
these new laws. Tax exemptions and cuts are a double-edged sword. One on hand, your
salary has a slight increase, the bigger picture in terms of government budget suffers a blow.
This year, the government targeted a P110.9B deficit for January to March this year, calling
quarter one's rates manageable. However, considering the budget deficit and the
outstanding debt, the Philippine budget may be deficit-free by 2013. Note, though, that this is
with a big maybe.
The Philippines is in a strange situation. It has one of the highest taxes in the Southeast Asia
and yet, it also has the highest spending in terms of debt. On the average, our neighbors
spend 30% for their debts while we spend 56%.
Do we see or even feel the benefits of the fruits of taxes or debts? The construction of a new
LRT line and several other roads and infrastructures may argue that our taxes are doing work
for us, but then again, the projects have been done in partnership with foreign entities, which
fails to qualify it as a local project. Sure, you see roads paved or built or street lamps erected,
but is this all what we are supposed to get from our taxes? Are we getting a limited kind of
benefit, thanks to our debts and deficits?

Currently, the things that we know of tax benefits are newly constructed highways aimed at
lightening traffic, railway systems intended to ease up clogged highways, state pension, and
even rescue operations when calamity strikes. The intent is good, admittedly, but the
execution of these services leaves a lot of room for questioning and analysis: does the status
quo provide enough budget allocation for the different sectors of society? Are we getting as
much as we should from our taxes?
On the other side of the world, Scandinavian countries pay massive amounts of taxes. The
countries in Northern Europe are among those who pay the highest taxes in the world with
Denmark having 61% and Sweden with 59%. With these large rates, one would expect a
discontented if not slightly irked populace. After all, with a take home of barely 40% of your
income, why would you be happy? On the contrary, the Scandinavians do not really have a
strong resistance when it comes to paying taxes. Why? Because they have an effective system
that takes care of them and looks after their needs. High income tax rates finance a huge
public sector in these countries, too. However, unlike the Philippines, these countries enjoy
free quality education, health care, and social security that provides monthly stipends to
seniors and to the unemployed. They enjoy good social services, thanks to their governments'
budget allocation and deficit management.
It has been said that a state's tax system reflects the values of its communities and of those
who are in power. Taking this to the local setting, it seems that we have no clear idea of what
we want to happen and where we want to go. Sure, there may be a small trickle down of the
benefits of taxation, but with politicians being accused of corruption and pocketing honest
taxpayers' money, what hope do we have of establishing a goal that would unify us as a
nation? Are we a nation that aims to arm the youth with quality education or are we one that
focuses on industrialization and development? Indeed, with almost every sector saying that
the budget allocation they get from the government isn't enough, it looks like we are just
going nowhere in terms of allocating and spending the money we get from taxes.
Are taxes really necessary or are we just providing funds for a vicious cycle of corruption? If
something is so evil that it needs to be removed, would our lives be better off without a
taxation system?
There are several theories and objections that are against taxation. Mainly, these theories say
that taxation is essentially wide scale theft done by redistributing income. While there are
those who may propose alternative means to providing income to the state or to fund social
projects, there are still those who argue that taxation is a system that works for the collective
good, in spite of its pitfalls and susceptibility to corruption. A lot of political philosophers say
that taxes may work for a state, as long as the taxes fund activities that give benefits to
citizens. With benefits that come with an efficient and working tax system, it could be argued
that it is necessary since it is, after all, the lifeblood of a functioning state.
Tax is not purely evil, it is a necessary one. In the first place, how do we define 'evil'? In this
situation, I guess evil could be defined as something that does more harm than good. If we
talk about taxes, does implementing a taxation system yield bad social conditions and dire
economic situations?
Taxes are not designed to be evil mechanisms of a state or government. In fact, they have
been reformatted and tailored in such a way that the revenues are funneled towards projects
that are for the general good and mostly for the benefit of the disenfranchised. The intent of
gathering tax revenues is to fund projects and services that would help improve the lives of

the general public, which is far from being an evil thing. However, the problem starts when
allocation and budget are brought up, especially since taxes are allegedly being pocketed as
much as they are being spent. As was already mentioned, a state is defined by the goals of its
budget allocation. What does ours say as a nation? What do Filipinos aspire and hold dear?
For now, the answer may be freedom from debt coupled with the desire to be a competitor in
emerging markets in the region. Our taxes help support the economy and the government's
recent effort to stimulate the Philippine market. The Arroyo administration spent P290 billion
to galvanize the economy in order to keep it from collapse.
True, the tax system may come with burdens and rules, but Filipinos stand to gain more if
there was proper budget allocation as well as clean and honest officials who really put these
funds into good use. Taxation is a necessary evil: it still manages to provide for Filipinos,
even if the quantity and sometimes quality of service is of question. We do get a little bit of
something for our taxes but should it stay that way? Since we have one of the highest taxes
this side of Asia, isn't it about time that we get more for what we literally pay for? This issue
is one of the major ones that presidential candidates need to focus on and discuss in their
platforms since it would reflect his or her agenda for the country.
Aside from the question of what a candidate could do for his or her country, perhaps we
also need to ask: what will you do with our taxes? Would you mandate and create more
laws that would help lower taxes and would you get more aggressive in revenue collection?
Would you focus more on education or would you focus on economic policies and programs,
and bring the budget towards those goals? Would you prioritize agriculture or
industrialization? Such essential questions are tied to the concept taxes and budget allocation
that the would-be president has to highlight if not discuss. Other than concerns on how the
next president would help improve social conditions and quality of life in our country, we
also need to ask: what will you do with our money? After all, we are providing the funds for
his or her administration so we have the right to ask for transparency when it comes to these
matters.
It takes an evil official to tarnish the idea of taxation. Vilified as it may be, taxes are
necessary in providing for citizens. We want more from our taxes, yes and we want to feel the
benefits on a more wide-scale perspective. We want more projects that promote development
and progress. With all these hopes, dreams, and goals, we need a president who would make
taxes work for us instead of making it into some entity that we have started to become wary
of and sort of despise. We need a leader who knows how to work for us and help make taxes
a small price to pay for an improved country.
(The article reflects the personal opinion of the author and does not reflect the official stand of the
Management Association of the Philippines. The author is Tax Partner of Endriga, Manangu &
Associates, CPA's and Management Consultants. Feedback at map@globelines.com.ph. For previous
articles, please click
<http://map.org.ph/members/mappingthefuture.php?dir=MAP%20Insights>).