Monday , June 25, 2018

Aquino urged to support bills lowering income taxes in final Sona

A LAWMAKER urged President Benigno Aquino III on Wednesday to express support to bills that will lower individual income taxes in his final State of the Nation Address (Sona).

Senator Juan Edgardo Angara, chairman of the Senate committee on ways and means, said he is hoping that among the measures the President traditionally mentions in the Sona as for priority approval are those that will revamp tax brackets.

He said the measure could be Aquino's "best goodbye gift" to the public.

He noted that Senate alone cannot pass the bill lowering income tax rates because the Constitution provides that all revenue measures must originate from the House of Representatives.

Angara said the President’s mention of tax reforms in his Sona could mobilize support from the members of the House, ending the embargo in serious discussion for lower tax rates.

“The Department of Finance has already expressed its openness to review and amend the tax rates and brackets, and we welcome this progress. We should let the executive guys run the numbers and tell us how far they think they could lower (tax) rates,” he said.

In making one final push for lower income taxes, the senator said concerns aired by revenue officers that altering tax rates will punch a big hole in the coffers should not be a dilemma because any revenue loss is recoverable.

Angara said that if withholding tax is converted into disposable income, it can be then recouped through the value added tax (VAT) on goods.

If part of the salary intended to be remitted to the Bureau of Internal Revenue will now be spent for goods, he said it can still be recaptured through the tax on the goods bought.

“It will also be good for the economy. It is always better to plow money back in circulation, where it can simulate the production and consumption of goods. Sometimes, instead of government doing the spending for the people, let the people do the spending themselves,” the senator said.

The senator said the Philippines has the second highest individual income tax rate in the region at 32 percent next to Thailand and Vietnam with 35 percent each, and the highest VAT at 12 percent.

He stressed that the country’s current individual income tax bracket has remained unchanged since 1997 until today even when the consumer price index has already almost doubled.

“We need to think ahead and be competitive in the region but more importantly, we must give Filipino people a break. Currently, a policeman and a teacher whose net taxable income is P150,000 are taxed at the highest rate,” Angara said.

“If we will just let this to continuously happen and we will not make necessary action to amend the system in taxation, probably in the next years, the tax rate of teachers, nurse, and police will be the same as the tax rate of country’s millionaires and billionaires,” he added.

Angara called the situation “bracket creep” where taxpayers who are not considered high earning are already pushed into high brackets.

Economists said this bracket creep would, at some point, lead to fiscal drag where people will not have any purchasing power left to contribute to the economy due to excessive taxation.

Angara authored a bill compressing the net taxable income brackets and lowering tax rates, especially for low and middle income earners.

If enacted into law, he said the measure would retain more money in pay checks of ordinary salaried workers and would lead to greater voluntary compliance.

He added that it would also attract human capital and would prevent the mitigation of the country to other countries that do not reward industry and productivity with high tax rates. (Sunnex)