AFTER the Palace rejected the measure lowering individual and corporate tax rates, the leadership of the House of Representatives on Sunday urged the country’s economic managers to continue to find solutions on how to increase the take-home pay of Filipino workers.
Speaker Feliciano Belmonte Jr. said President Aquino is not rejecting the idea of lowering individual and corporate tax rates.
“The President is not exactly rejecting it [the proposal to lower income and corporate taxes]. [However, we should admit that] it requires a lot of study. I think our income-tax system really needs a deeper study because the rates are based on values long ago, readjust them with the values that they had,” Belmonte said.
“The President was hardly challenged [by this proposal]. Ang sinasabi n’ya lang saan natin babawiin ang P30-billion government revenue lost, if he approves the proposal. He’s [President Aquino] only saying show me where the money is gonna come from or how we will replace it and I’ll give it,” he added.
Taking a cue from the Department of Finance (DOF), Malacañang rejected measures to adjust individual and corporate income-tax rates, saying the government is putting the country’s sustainability and credit rating at risk by doing “piecemeal revenue-reducing legislation.”
The DOF has warned lawmakers that reducing individual income and corporate tax rates may cause the government to lose as much as P30 billion in revenues, or 1.5 percent of the country’s gross domestic product.
Despite the Palace’s disapproval of the tax-reform bill, Belmonte said he remains supportive of moves to lower individual and corporate tax rates.
“I am very wary of things that impact so much, but I also believe that the fixed-income group are paying more than they should, as I’ve said because of inflation, in effect, raised them to higher tax level than the real value of what they’re earning. That’s the big problem, perhaps the whole should be examined,” he said.
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 at 12 percent, as the country’s current individual income-tax bracket has remained unchanged since 1997.
House Committee on Ways and Means Chairman and Liberal Party Rep. Romero Quimbo of Marikina, one of the authors of the tax-reform bill, said the measure is seeking the revision of income-taxes for compensation income earners, self-employed and professionals, and corporations through simplification of tiers and rates, and indexation to inflation.
Under the House version of the measure, Quimbo said public and private workers earning P180,000 and below will be completely tax-exempt.
In the current setup, those earning P10,000 or less per month pay a 5-percent income tax.
Quimbo also said 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 at 30 percent will be paid by those earning P10 million annually.
Currently, those with yearly earnings of P500,000 and above pay 32-percent income tax.
Quimbo also said the proposed measure will also reduce the corporate income tax to 25 percent from the current 30 percent.
To recover revenues lost, he said, Congress would also approve revenue-generating measures such as bills raising excise tax on fuel, the fiscal incentives rationalization bill, the proposed Tax Incentives Management and Transparency Act, Customs Modernization and Tariff Act, Rationalization of the Mining Fiscal Regime, and a bill imposing specific tax on sodas and other sweetened beverages.
