THE leader of the House of Representatives has recently expressed support for the passage of the measure lowering individual tax rates.
Speaker Feliciano Belmonte Jr., in a recent interview with reporters, said that now is the right time to readjust the tax on income to increase the take-home pay of ordinary workers.
“The value of money is going down, but the rates not only of income tax haven’t been resolved in a long time. So on that principle, yes, readjust them with the values that they had,” Belmonte said.
Currently, there are 14 bills pending at the lower chamber seeking to lower the individual and corporate tax rates.
Belmonte said that the Congress leaders may discuss the tax-reform measure during their regular monthly meeting.
“Actually, we are due to have a meeting with the senators. So we can see what measures are the doables, so that we can achieve the doables. But there’s no schedule yet [of that meeting],” the Speaker said.
Under the lower chamber’s version of the bill, individuals earning below P180,000 annually will be exempted from paying income tax.
In the current setup, those earning P10,000 or less per month pay a 5-percent income tax.
The bill also reduces the income-tax rate for those earning above P180,000 to 5 percent. The highest rate, at 30 percent, will be paid by those earning P1.1 million annually, he said.
Currently, those with yearly earnings of P500,000 and above pay a 32-percent income tax.
The Philippines has the second-highest individual income-tax rate in the region, at 32 percent, next to Thailand and Vietnam’s 35 percent, and the highest value-added tax (VAT) at 12 percent as the country’s current individual income-tax bracket has remained unchanged since 1997.
Earlier, chairman of the House Committee on Ways and Means and Liberal Party Rep. Romero S. Quimbo of Marikina also appealed to Congress leaders to urge President Aquino to immediately convene the Legislative-Executive Development Advisory Council (Ledac) to tackle the measure lowering of income taxes.
Quimbo, one of the authors of the bill at the lower chamber, asked Senate President Franklin M. Drilon and House Speaker Feliciano Belmonte Jr. to initiate discourse with President Aquino on lowering income taxes through the Ledac with the end view of comparing data and reaching a consensus on the proposal for income-tax reforms.
Also, the Department of Finance (DOF) has already proposed to President Aquino to reduce the individual income and corporate taxes but recover the revenue losses from that tax reform by increasing the VAT. The President, however, reportedly junked the proposal of the finance agency.
In a DOF memorandum, the agency asked Mr. Aquino to endorse its proposed “Comprehensive Tax Reform Package,” which includes an all-in income-tax exemption of P1 million to all wage earners.
However, the department also proposed to increase VAT from 12 percent to 14 percent, and expand VAT based by removing all exemption except agriculture, health, banks, education and remove zero-rating except direct exports.
Meanwhile, besides President Aquino, several lawmakers have also expressed their opposition to the DOF plan reducing the individual income and corporate taxes and increase the VAT.
Deputy Majority Leader and National Unity Party Rep. Magtanggol T. Gunigundo of Valenzuela said that increasing VAT proposal must be evaluated as it appears self-defeating and negates the perceived positive effects of lowering income-tax rates, which is key to a broader tax base.
“Coupled with simple easy to follow rules, compliance rates and revenue collection will definitely improve with lower tax rates, not to mention improving the savings ratio of Filipinos. Increasing VAT rate from 12 percent to 14 percent might dampen the spending mood of taxpayers and could lead to a slowdown of the economy,” Gunigundo said.
Party-list Reps. Antonio Tinio of ACT Teachers and Terry Ridon of Kabataan, meanwhile, said that reforming the individual income tax system is long overdue and must be addressed by the Aquino administration, “but raising VAT is not an option.”
“We vehemently oppose any move to raise the VAT to offset revenue losses from the lowering of individual tax rates. That would regressively shift the tax burden from lower and middle fixed-income earners to the poor working mainly in the informal economy,” Tinio said.
On the other hand, Ridon said that “I don’t think the DOF should hold hostage the imperative of reducing individual income taxes by foisting upon the specter of a higher VAT. The latter is a clearly unacceptable proposal given its negative impact on the incomes of all Filipinos.”
House Committee on Ways and Means member and Liberal Party Rep. Anthony G. del Rosario of Davao del Norte, meanwhile, said that the DOF should study the VAT increase on luxury goods.
“I support the reduction of the individual tax rates. This will result in a larger take-home pay, thus, benefiting everyone. The economy will directly benefit from bigger consumer spending. But I don’t agree with increasing VAT from 12 percent to 14 percent, however I might be willing to accept a VAT increase but only for luxury goods,” del Rosario said.
Liberal Party Rep. Ben Evardone of Samar also asked the DOF to restudy its proposal.
“[The DOF] should rethink it because VAT affects everybody. It will have negative impact on the entire sector of society,” he said.
For Party-list Rep. Jonathan de la Cruz of Abakada, the DOF should maintain the VAT at 12 percent but “review all payroll taxes The value of money is going down but the rates not only of income tax haven’t been resolved in a long time.