Astral is a talented and resourceful person getting by in life, which isn’t easy these days, especially with three children. Like many other self-employed people in the personal care professions, including hairdressing and cosmetology, she lost income during the pandemic lockdown. She does her work mostly at home and sometimes at her clients’ homes. Before the COVID-19 pandemic, she served about four customers a day at prices ranging between $150 and $1,000 depending on the job. In a good month, Astral’s average net earnings could be over $18,000, more than secondary school teachers whose salaries are approximately $16,000. Astral lives in government housing and owed a few months’ rent before the COVID-19 lockdowns. She and her husband save, but it wouldn’t be enough to have a liveable pension in their retirement years.
Sunil is an expert technician, and his services are always in high demand. He can easily net $1,200 per day, more than most employees in the highest paying industries. He has a subsidised mortgage, other loans and a family of four.
Astral and Sunil may both be on the radar of the tax authorities because they would have had to give BIR numbers to finalise mortgages and rental leases for government or government-assisted housing. Whether they’re paying the full taxes due on their incomes as teachers and nurses do, may be another story. In fairness to Astral and Sunil, the same goes for the many million-dollar earners in white-collar professions. The difference between them and Astral and Sunil is they have excellent pension and medical plans and significant investments to breeze through retirement comfortably. They won’t need a government retirement grant but they're denying the country of income to upgrade and build modern schools and hospitals while benefiting from the full range of subsidies.
With the daily pressures, retirement savings aren’t, at this time, at the forefront of Astral and Sunil’s minds. To retire with a liveable pension, they would have to save upwards of $5.0 million, at minimum. To even get a bare minimum monthly pension of $5,000 per month, they would have to save at least $1.5 million. At retirement, Astral and Sunil are likely to seek a monthly government retirement grant to supplement their income, as they wouldn’t have sufficient money at the most vulnerable time of their lives. Yet, they would not have made a single contribution to the cost but don’t judge them. They have not been afforded the same opportunity as salaried employees who must contribute to a pay-as-you-go national pension fund. Like all other citizens, they have access to free education for their children, free healthcare and medications, subsidised electricity, gas, public transport, and water rates.
The public’s expectation of entitlement should be reversed. One could track the dysfunctional culture back to the political ethos and failed national policies. It was the late business luminary, Mr Michael Mansoor, who had once asked students of a graduating class, “Why do we have a world-famous Cocoa Research Unit with a world-famous International Cocoa Gene bank, and we rank nowhere among the cocoa producers of the world?” His question explains shortsighted policies and misguided priorities.
Continuous handouts to able-bodied people either directly or by way of subsidies disempower them. It entraps people into a vicious cycle of a shrinking productive group having to pay for everybody cousin’s friend and then called upon to pay more and more. But the mentality that the taxpayer will quietly continue to pay for everybody is deeply flawed. As water seeks its level, so too some of them will find ways to opt out, more so if they feel they aren't getting value in the delivery of services.
The dysfunctional system discourages and punishes individual and corporate taxpayers. It is counterproductive to growth, promotes a corrupt value system and social inequity. Social inequity or social injustice is usually associated with deprived and disenfranchised people. No one considers the extent of the social injustice done to the law-abiding taxpayer.
Indeed, Astral and Sunil incomes are not as secure as other professionals. Still, they can earn higher incomes based on their productivity and can save toward their pensions. And, for a new revenue authority to achieves its goals, those who are currently escaping the tax net must be brought into the system. We must resolve to nurture values of personal self-reliance and service quality while identifying and taking care of the many genuinely vulnerable people needing help.
Hopefully, the budget will encourage Tanty Cousin Friend’s Children to become self-reliant and set the tone for enterprise, productivity, and prosperity.