Here's an example of how 4Ps works. You get PHP 10.00 from your parents. You have siblings who have a job and one of them has a business. They are all giving money to your parents. Then you buy candy from your sibling who sells candy. The answer is did the money have any effect in increasing the revenue of the one who sold candy? The answer is no. The PHP 10.00 merely revolved around. It was just a refund and not an increase in revenue of PHP 10.00 compared to candy that was bought from your sibling if you bought it with your hard earned money. The PHP 10.00 bought from hard earned money adds PHP 10.00 gross profit in contrast to the PHP 10.00 that was given from your mother -- who also got the money from your siblings.
Let's just say that we issue PHP 3,000 pesos for the 37% of Filipinos who are poor. Let's start with the basic assumption that the PHP 3,000 pesos is spent on taxable goods and services such as commodities. Let's say that PHP 3,000 was given to 2,000,000 families which will mean a total of PHP 6,000,000 would be spent in taxable goods. Here's the theoretical part - how much of the spending would even be declared considering the problem of super high income tax bracket. A person may actually have gotten PHP 6,000,000 in real sales but may be underdeclaring it by even less than a half. So let's say he declared only PHP 1,000,000 as taxable income which would result to this:
If PHP 6,000,000 were declared as income tax...
(PHP 6,000,000 - 500,000)(0.32) + PHP 125,000 = PHP 1,885,000 collected taxes
But if PHP 1,000,000 was the only declared amount due to excessive tax policies we would only get...
PHP 500,000 (0.32) + PHP 125,000 = PHP 285,000.00
So think of this one. From the PHP 6,000,000.00 spent on 2,000,000 Filipinos for PHP 3,000.00 each how much did the government get in return? Only PHP 1,885,000 if it was honestly declared. But with the excessive tax system -- you may only get PHP 285,000.00 or even less. Imagine now the government has lost up to PHP 1,6000,000.00 in tax revenues! Still thinking that the money will return 3x to the government?
Under the new TRAIN law, let's do another computation:
(PHP 6,000,000 - PHP 2,000,000)(0.32) + PHP 490,000 = PHP 1,770,000 collected taxes
But if PHP 1,000,000 was the only declared amount even with better tax policies we would only get...
(PHP 1,000,000 - PHP 800,000)(0.3) + PHP 130,000 = PHP 190,000.00 collected taxes
Even more, the TRAIN law finally shows that the taxes will even be lower. So how much of the given money was returned? Not 3X but even less. But this doesn't mean I don't support the new law which lowers income taxes while increasing the amount of taxes through excise taxes. The excise taxes may be what will be more helpful to the economy when the MPC of every household is increased.
What on earth are the poor spending on? How sure are you that they are spending on basic commodities? Do you know that they might actually be buying smuggled goods or worse illegal drugs? If that's the case of PHP 6,000,000.00 were spent on shabu and smuggled goods then think there's even ZERO revenue for the government. Still think all it takes is for the poor to spend and the money will return threefold?
Besides, here's a warning that we need to heed. Why can't the government print more money which one can act as the "self-funding policy" of 4Ps? It's because if you print too much money it will lead to further devaluation and hence -- further inflation. While currency devaluation can be a good thing but only if you have an open economy to pay up the debts. 4Ps just will never do that.
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