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House gives up bid to lower individual, corporate taxes

 

After the Palace rejected the measure lowering the individual and corporate income-tax rates, the House Committee on Ways and Means on Sunday abandoned the target approval of the tax-reform measure set for this week.

In a radio interview, House Committee on Ways and Means Chairman and Liberal Party Rep. Romero S. Quimbo of Marikina City said Congress cannot pass a measure it knows will be rejected
by Malacañang.

“We need to be constructive; we cannot pass it only to be rejected by the Executive. In the end, our  tax-payers will not get the relief if we  don’t get the cooperation of the [Executive, particularly the] Department of Finance [DOF],” Quimbo said, days after he said he is looking forward to having the bill finally approved this week.

Last week Malacañang, taking the cue from Finance Secretary Cesar V. Purisima, said it was not keen on endorsing a bill mandating adjustments in individual and corporate income-tax rates, saying that, the government cannot put its fiscal sustainability and credit rating at risk ‘by doing piecemeal revenue-reducing legislation.”

The DOF has warned lawmakers that reducing the individual and corporate income-tax rates may cause the government to lose revenues totaling as much as 1.5 percent of the country’s gross domestic product,  or P30 billion.  Quimbo, however, said the government should not forget the ordinary Filipino worker, who will benefit the most from the tax- rate reduction, even as the government stands to lose P30 billion.

After all, he reasoned, the government has not been able to spend P500 billion in the current budget the legislators have appropriated.

Earlier, the BusinessMirror reported that President Aquino opposed the plan of the DOF to reduce the individual and corporate income-tax rates, and compensate for the revenue loss by increasing the value-added tax (VAT) to 14 percent, from the current 12 percent.

Quimbo said reconvening the Legislative-Executive Development Advisory Council (Ledac) immediately should help untangle the issues involved in the measure scaling back the individual and corporate income-tax rates.

The President chairs the Ledac, and is participated in by the Vice President, the Senate President, the House Speaker, seven Cabinet members, three senators, three House members and one representative each from the local governments, the youth and the private sector.

“We really need to sit down and see what are the points of agreement, and what are the points of disagreements,” Quimbo said.

The Philippines owns the second- highest individual income-tax rate in the region at 32 percent—next only to Thailand and Vietnam’s 35 percent—and the highest VAT rate of 12 percent; the country’s individual income tax bracket having been unchanged since 1997.

Quimbo, one of the authors of the bill, aims to recast the tax rate for compensation income earners, self-employed, and professionals and corporations through the simplification of tiers and rates, as well as link these to inflation.

The lawmaker said that, under the House version of the measure, public and private workers earning P180,000 and below will then be completely tax-exempt. In the current setup, those earning P10,000 or less a month pay a 5-percent income tax.

Quimbo added that the bill also reduces the income-tax rate of those earning above P180,000 to P500,000 and above P500,000 to P10 million from the current 30 percent to 9 percent and 17 percent, respectively.

He said the highest rate of 30 percent will be paid by those earning P10 million annually.

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