Senator Juan Edgardo Angara. FILE PHOTO
MANILA, Philippines – Neophyte Senator Juan Edgardo Angara is pushing for the passage of a bill that seeks to reduce an individual’s income tax rate from the current 32 percent to 25 percent by 2017.
Angara said Senate Bill No. 2149, which he filed, also aims to adjust the individual income tax brackets.
“The general policy is that taxation must be uniform but it also must be progressive. Dapat nakabase siya sa kakayahan ng taxpayer na magbayad (It should be based on one’s capability to pay),” Angara, chairman of the committee on ways and means, said in a statement issued on Wednesday.
“Karamihan nga sa ating mga kababayan ay lugmok sa kahirapan (Many of our people are so poor), 30 to 40 percent are living below the poverty line. We must do everything we can to help them and I think this is one way we can look at,” he said.
To buffer the revenue impact of the individual income bracket adjustments and the reduction of individual income tax rates, the bill provides that the tax rate reduction will be spread over a period of three years starting 2015.
But Department of Finance Undersecretary Jeremias Paul, during Tuesday’s hearing of the committee, said the government would lose at least P43 billion by 2017 if the bill is passed.
The Bureau of Internal Revenue also reiterated during the hearing that it would oppose any measure that would result to revenue loss.
“Since we are tasked and our performance is based on collection, it would be positive for us if whatever measure would be revenue neutral and if there will be resulting revenue loss, there should be identification of revenue raising measure to compensate the revenue loss that will result from this proposal,” BIR Assistant Commissioner Marissa Cabreros told the committee.
But Angara said, “Tax system should not only be a means to raise revenues for the state but it should also be a way or a method by which the state can promote its ends.”
“I know the Aquino administration is big on inclusive growth especially in a country where there are vast income differences. We’re on the same team here. I think with smaller tax rates, we can have greater voluntary compliance,” he said.
While there have been reports that the counterpart committee in the House of Representatives is looking into raising the value added tax (VAT) to compensate the revenue loss of lowering income tax, Angara warned that increasing the VAT might also trickle down to the purchasing power of consumers.
“Not to mention it’s very unpopular,” he said.
Nevertheless, Angara said he would refer similar bills reducing income tax to a technical working group to further study the matter.
The senator said his bill was also in preparation for the Association of South East Asian Nations (Asean) Integration, and consistent with the Philippine commitment to the 10-member Asean Economic Community (AEC) Blueprint, which seeks to transform Asean into a single market and production base by December 2015.
“While the Asean Blueprint does not mandate member countries to amend their income tax schedules, it is highly expected that human capital would flow to where it could earn best. When the AEC Declaration was signed in 2007, some member-states began to lower their corporate and individual income tax rates, with further reductions in the subsequent years,” he said.
Angara noted that the Philippines has the third highest individual income tax rate next to Thailand’s 37 percent and Vietnam’s 35 percent.
The highest tax bracket of Cambodia is 20 percent; Indonesia, 30 percent; Laos, 24 percent; Malaysia, 26 percent; Myanmar, 20 percent; and Singapore, 20 percent.
He also noted that the country’s current individual income tax bracket has remained unchanged since 1997 even when the consumer price index has almost doubled already.
“In order for the Philippines to attract human capital and to prevent the migration of our own, it is imperative that we reduce the existing income tax rates while maintaining the progressivity of our income tax system, as mandated by the 1987 Philippine Constitution,” Angara added.