Lower individual taxes will make the Filipino workforce more competitive with their Asean peers, according to a group of tax consultants and corporate tax practitioners.
The Tax Management Association of the Philippines (TMAP) has been urging the government to slash the 32-percent maximum individual tax rate, which includes underlying marginal tax rates, to 20-30 percent.
In reducing the tax rates, the government can “promote equity in the tax system and make the Philippine workforce competitive with its Asean neighbors,” TMAP president Rina R. Manuel on Wednesday said in a position paper submitted to the respective ways and means committees of the two chambers of Congress.
Lower individual taxes would also “bridge the gap in the taxation of overseas Filipino workers (OFWs)—who are tax-exempt—vis-à-vis those who choose to stay and work in the country.”
TMAP is lobbying for the downward adjustment of individual tax rates starting taxable year 2015.
The group also wants the tax base rectified, citing “outdated values due to inflation.”
In particular, TMAP welcomed the passage after second reading of the house bill aimed at lifting the P30,000 tax-exemption ceiling for 13th-month pay as well as other benefits.
“Unlike other tax proposals, this correction or updating of the tax base and/or tax brackets will not require any further review or change in the current PIT [personal income tax] system… [A]n increase in the P30,000 tax-exemption threshold for 13th month pay, bonuses and other benefits only requires a recommendation from the BIR [Bureau of Internal Revenue], similar to the increase in the VAT [Value-Added Tax] exemption threshold which was made by the BIR in 2012,” TMAP pointed out.
However, the group criticized the BIR’s “inaction” on the matter, even as it pushed for the passage of a law that would correct the tax base as early as end-2014 or beginning the next taxable year.
Citing the need to adjust income tax brackets to their current values, a law updating the income tax brackets with an automatic proviso that will enable indexation against changes in the consumer price index (CPI) every three years is also being pushed so it may take effect by taxable year 2015.
As a whole, TMAP said, it is advocating a “simplified and more equitable tax system that will help broaden the tax base, improve compliance and, consequently, increase tax collections.”
To reform the tax code, TMAP recommended the review of the tax system for self-employed individuals and professionals, as well as marginal income earners.
Doing so would “facilitate greater equity and ease the burden of compliance,” the group said.