Passage of tax bill by ’16 still possible
AS DEBATES over prospective tax reform measures heat up ahead of the 2016 Presidential polls, a compromise tax bill that at least adjusts tax brackets for inflation may still be passed before the end of President Aquino’s term, New York-based think tank Global Source said.
Around this time last year, Global Source called attention to the higher likelihood of Congress passing revenue-eroding tax measures as election season near. A law has since then been enacted increasing the tax-exempt threshold for employee bonuses, adjusting for inflation the cap of P30,000 set 20 years ago, raising this to P82,000.
The adjustment hardly caused a stir, probably because only a small group of taxpayers benefited and the estimated revenue losses, varying widely from a low of P2 billion to as much as 30 billion (0.2 percent of gross domestic product), were likely viewed as modest especially after considering some offsets from consumption taxes, the think tank said in a commentary written by Filipino economists Romeo Bernardo and Marie-Christine Tang.
Since then, a second legislative proposal is gaining ground, one that the President himself now supports, only to lately soften his stance.
“The changed posture, not unrelated to the electoral chances of his chosen presidential candidate for next year’s vote, follows wide public support for the measure, including from respected civil society groups that are not known to have a populist bent,” Global Source said.
There are three separate bills in the Senate and at least five in the House of Representatives currently seeking to reduce income taxes for individuals.
The key justification is quite straightforward and similar to the earlier measure – the need to have the income brackets that define the rates at which individuals are taxed inflation-adjusted, the think tank said.
The seven-tier brackets were set in 1997 and adjustments would require doubling the incomes in each bracket, thus moving individuals down the schedule to lower marginal tax rates. For example, those earning P300,000 a year, currently taxed at 30 percent, will instead be taxed at 25 percent.
“Proponents argue that this adjustment would make the tax system fairer and ease some of the burden on wage earners. Estimates of revenue losses are in truth not excessive. A commonly cited figure attributed to the DoF (Department of Finance) is P30 billion, although a third party estimate puts the cost at a higher P54 billion,” the research said.
Along with the earlier law on tax exemptions, the government is seen to translate to foregone revenues equivalent to 0.5 percent of GDP. Proponents further argue that workers are likely to spend the extra income, allowing government to collect higher value added tax (VAT) to partially make up for reduced income taxes.
But other versions of the proposal seek to reduce not only personal but corporate income tax rates (such as reducing to 25 percent both the top marginal rate for individuals, currently at 32 percent and for corporations , now at 30 percent).
