Malacañang still cool on income tax cuts

MANILA, Philippines - Barely a week after Congress resumed session, the Aquino administration has renewed its opposition to lower income taxes, suggesting Malacañang’s persistent cool reception to the measure.

“The Department of Finance is, and always has been, in favor of reforming the tax system,” Finance Secretary Cesar Purisima said in a statement Friday.

“The question is whether we should go for real, comprehensive tax reform, or address the issue in a piecemeal and politically-charged manner that can only stunt the momentum of development,” he added.

President Aquino’s allies in Congress have been pushing for the reduction of income taxes that go as high as 32 percent, one of the highest in Southeast Asia.

At the forefront are Liberal Party stalwarts Marikina Rep. Miro Quimbo and Sen. Juan Edgardo “Sonny” Angara who filed House Bill 4029 and Senate Bill 2149, respectively, both pending at the committee level.

Leaders from the House of Representatives and the Senate could not be immediately reached for comment.

Saying legislators have been painting an “incomplete picture” of the country’s tax system, Purisima said structural problems that hinder tax administration – and not policies themselves-- have in fact hindered the government from collecting revenues.

“Reforming the country’s outdated tax laws would give the Philippines a competitive edge in the Asian Century,” the finance chief said.

“Simplistic solutions that do not address the complex structural issues that underpin our tax system run contrary to this vision,” he pointed out.

Citing data from the Bureau of Internal Revenue (BIR), Purisima said lowering income taxes could narrow the state’s tax base more, noting that a large pie of BIR collections-- around 64 percent-- are being sourced from only 2,128 companies.

On top of that, the bureau has estimated that at least P200 billion in revenues are being lost annually from non-paying self-employed individuals and professionals such as doctors, lawyers and businessmen.

If tax evasion cases being filed every two weeks are of any indication as well, the BIR has also already lost roughly P73 billion to more than 400 cases filed under its Run After Tax Evaders program since July 2010.

“We cannot take a reductionist or simplistic approach to tax reform. It is easy, and I must say, very popular during election season, to cut taxes, and if we only look at this as a simple yes or no question, who wouldn’t want to?” BIR Commissioner Kim Jacinto-Henares said in the same statement.

“But we must be more fiscally responsible and ask the right, even if they are tough, questions in making our effort at tax reform a balanced one, for the sake of those whom we pass this country on to,” she explained.

To start with, Purisima said legislators could push for the revisions of the country’s bank secrecy law that stops the BIR from examining bank accounts for tax purposes, meaning to match tax payments with an individual’s income.

“A hurried tax reform plan, absent the necessary transformation of our restrictive bank secrecy laws, and done with undue haste during the frenzy of elections, would be a grave disservice to our people,” the finance czar said.

“We call on them and the Filipino public to support bank secrecy reform as a prerequisite and pillar of any proposed tax reform plan,” he added.