Philippines: First Step, Lower Taxes

(Published in Free Enterprise Vol. 1 Issue. 2 2010)

There are a lot of developing countries in the world who are looking for an answer to their woes, our country being one of them. The biggest question out there is “How do we become a 1st world country?” A great first step for us would be; lower taxes. Lower it as much as possible.

Almost all countries that took this first step towards greater freedom and capitalism reaped immediate benefits. To name a few, there are former communist states like Estonia, Poland, Russia. And then there is Ireland, which was considered the “Sick Man of Europe” but has since transformed into the “Celtic Tiger.” Each and everyone of these states have found a greater degree of prosperity.

This is because a low tax rate increases foreign investment, creates more jobs, lessens the government’s wasteful spending(usually), encourages businesses to expand and most of all it allows people to keep more of what is rightfully theirs; the fruits of their labour.

Unfortunately, the economics of high taxes is still pretty much alive today. Countries at the cusp of making it, destroy all their potential growth by confiscating more and more of its citizens hard earned money. There is a mistaken view in economics that somehow higher taxes can result in a better country. The view is usually, to put it simply; “It’s okay if the government raises taxes, so long as I’m getting good services out of it.” The problem is, with the exception of the Military, the Police department, and the Courts, government has never done anything so well that the private sector can’t do it better and cheaper.

If one needs a historical example, one simply needs to look at the now defunct Soviet Union. There the government sought to provide its people free education, free healthcare, free housing and free everything. The result was poverty, stagnation and misery. Not to mention the countless deaths resulting from such a Totalitarian government. And such results are shared to varying degrees by all nations who have chosen to make their government the “great provider.”

In addition, raising taxes is usually thought of as necessary to fix the deficit of a country. There is a better solution to such a problem and that is to cut spending. Raising taxes hurts the economy which means such a policy would be more disastrous than helpful. Plus there have been many occasions where government revenue has actually increased after lowering taxes, this is due to the increased economic growth and productivity resulting from such a policy

So for our nation to prosper and to be a better country over all, the first step should be clear. Lower taxes.