Gov’t to impose higher tax on ‘ultra rich’
For the “ultra rich” earning P5 million or more a year, the Department of Finance (DOF) plans to impose a higher personal income tax rate of 35 percent while rates for middle-income earners will be slashed to about 25 percent, officials said Wednesday.
Finance Undersecretary Antonette Tionko, who is also revenue operations group head, told reporters that the “modified” tax brackets to be pitched to legislators under the proposed tax policy reform program would retain the 32 percent tax rate for those earning P3 million and up.
In the case of those earning P5 million, the rate will be hiked to 35 percent, Finance Secretary Carlos Dominguez III said.
Tionko said there would be five or six brackets under the proposed personal income tax structure, fewer than the seven at present.
A draft of the tax policy reform program showed that program’s first package, aimed for passage next year, would adjust personal income tax brackets to correct so-called income creeping; reduce the personal income tax maximum rate over time to 25 percent from 32 percent at present, except for highest income earners, and shift to a simpler, modified gross system.
This will entail six income brackets:
Article continues after this advertisementthose earning zero to P250,000 per year, to be slapped P2,500 in income tax
Article continues after this advertisementover P250,000 to P400,000, tax of P2,500 plus 20 percent of the amount in excess of P250,000
over P400,000 to P800,000, tax of P32,500 plus 25 percent of the amount in excess of P400,000
over P800,000 to P2 million, tax of P132,500 plus 30 percent of the amount in excess of P800,000
over P2 million to P5 million, tax of P492,500 plus 32 percent of the amount in excess of P2 million
over P5 million, tax of P1,452,500 plus 35 percent of the amount in excess of P5 million
The tax rate for those earning P250,000 and below yearly, which account for 83 percent of taxpayers in 2013, will be kept on the second year onwards; while the tax rates for the five other income brackets will be adjusted downward.
Citing Bureau of Internal Revenue data, Tionko said there were less than 1,000 Filipinos falling under the category “ultra-rich,” which she said was defined by the World Bank as earning P5 million a year.
To compensate for the foregone revenue from lower personal income tax take estimated at P159 billion, the Duterte administration wanted to expand the value-added tax (VAT) base by limiting exemptions to raw food as well as other necessities such as education and health; increase the excise tax on petroleum products and index it to inflation; levy a P5 per kilo tax on sugary products (domestic raw sugar, refined sugar as well as imported sugar and sugar substitutes); relax bank secrecy for fraud cases; and include tax evasion as a predicate crime to money laundering.
In terms of revenue impact, the first package will bring about a net gain of P200.7 billion, as the loss from reforming the personal income tax system will be compensated by gains of P163.4 billion from VAT base expansion, P178.2 billion from higher oil excise tax, and P18.1 billion from sugary product tax.
In the meantime, the three new DOF undersecretaries took their oath Wednesday. They are Tionko; Karen Singson, chief of staff and privatization group head, and Bayani Agabin, legal affairs head as well as in-charge of the domestic finance group.
Former World Bank Philippines economist Karl Kendrick Chua will also join the DOF as undersecretary and new chief economist.
They join Undersecretary Gil Beltran, former DOF chief economist, now head of the corporate affairs as well as policy development and management service groups, and Ma. Lourdes Recente, now Privatization and Management Office executive director. Beltran was also designated the DOF’s anti-red tape czar.
Appointed assistant secretaries were Ma. Edita Tan of the international finance group, Soledad Emilia Cruz, Mark Dennis Joven, and Daniel Marie Rieza Culangen.
