DOF eyes phased cut in income tax rates
The Department of Finance sees individual income tax rates being reduced significantly, but on a staggered basis, over the next few years as it moves to fulfill the campaign promise of President Duterte to lower the tax burden of Filipinos.
“Our plan is to reduce the tax rates over three years from 32 percent to 25 percent,” Finance Secretary Carlos G. Dominguez III told reporters recently.
The move to reduce the tax burden comes after Duterte reiterated his promise during his first State of the Nation Address where he said his administration “will pursue tax reforms toward a simpler and more equitable, and more efficient tax system that can foster investment and job creation.”
“We will lower personal and corporate income tax rates,” the President said.
As opposed the the thrust of the previous administration of pushing tax compliance to raise government revenue, the current administration hopes to encourage greater economic activity—and ultimately higher tax revenue—by leaving individuals with more disposable income to spend for their basic needs.
In terms of personal income taxes, the finance chief said the administration planned to revisit and update the government’s tax tables which were put in place in 1997 when the Comprehensive Tax Reform Program was passed.
“There are two things we are going to do with individual tax rates,” he said. “And number one is we will redo the tax tables which were done in 1997 whereby you have to earn only half a million pesos a year to hit the top [tax] rate of 32 percent.”
Dominguez explained that the scheme needed to be updated to reflect current economic conditions.
“We hope to be able to adjust it with inflation, and the top tax rate will be much higher than the P500,000 a year,” he said.
More importantly, however, the head of the Duterte administration’s economic team said that the headline income tax rate for individuals would also be reduced under the plan that they would submit to Congress.
From a high of 32 percent, individual income taxes should be cut in phases to 25 percent over a period of two to three years, he said.
“These are our plans, and we have to go to the House of Representatives and the Senate,” Dominguez said. “So we have a big fight coming along. Next weekend we are going to start to argue with our friends in Congress.”
