Senator Juan Edgardo Angara. FILE PHOTO
To ease heirs’ tax burden from their deceased relatives’ assets, the Senate ways and means committee plans to prioritize measures aimed at reducing estate tax, Senator Juan Edgardo “Sonny” Angara said Sunday.
Angara, who chairs the committee, said in a statement that they also wanted to widen the coverage of tax-deductible expenses, including medical expenses incurred by the deceased.
“The end result is that a grieving family will be spared the further anguish of paying high estate taxes which often delay the distribution of the assets to the heirs,” Angara said.
“This tax hurdle, plus unfamiliarity with estate taxes and cultural avoidance to discuss death-related affairs, has led families to delay settling the estate, resulting in huge penalties and surcharges while use of assets is not maximized,” the senator added.
Finance Secretary Carlos G. Dominguez III had said he wanted to see the estate tax rate of 20 percent be cut to as low as 6 percent of the value of the property being transferred.
If passed by Congress and enacted into law, this lower estate tax rate would put it on a par with the tax level for capital gains, which, at present, is the preferred method of transferring assets from a property owner to his heirs.
Angara earlier filed Senate Bill No. 980, which incorporated estate tax reforms.
The senator said the estate tax regime should have rules that will be easy to comply with on top of affordable rates.
“Present estate tax rates, like those for income taxes, were pegged in 1997, so it is time to adjust them because some exemptions are ridiculously low,” Angara noted.
Since adjusting estate tax rates would double the tax-exempt values, Angara was proposing a resetting of rates every three years, with inflation as basis.
Also, the senator was pushing for an increase to P2 million from P1 million at present the standard deduction in the computation of estate tax, while a family home valued at P2 million will no longer be taxed, a tax-exemption threshold double the P1 million at present.
“Heirs can also charge to the estate medical expenses of up to P1 million and funeral expenses of up to P500,000, in recognition of the high cost of dying the country,” Angara said of his bill.
If passed into law, an authorized heir or estate administrator will also be allowed to withdraw P200,000 from the deceased’s bank deposits.
“By lowering the compliance hurdle for what is essentially an inheritance tax, tax clearances, which are a requirement for a real property’s sale, will now be expedited, resulting in the asset’s commercial exploitation.” Angara explained.
“It will be good for the heirs because they can now enjoy the assets, good for the government because collections will increase, and good for the economy because assets will be freed for development,” he added.
Citing Bureau of Internal Revenue data, Angara said just seven in every 100 deaths settle estate taxes, such that total payments accounted for a mere one-sixth of a percent of the BIR’s tax take. JE
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