House open to lower income tax rates

MANILA, Philippines - The House of Representatives is open to a proposal in the Senate to reduce individual and corporate income tax rates, Sen. Juan Edgardo Angara, ways and means committee chairman, said yesterday.

He told ABS-CBN News Channel that he has met with his House counterpart, Marikina Rep. Romero Quimbo, to discuss the proposal and that the latter “is open to the idea.”

“They want to act first on the bill increasing the amount of tax-exempt year-end bonus, but they are open to the idea of reducing income taxes for both individual and corporate taxpayers,” he said.

He said he found the openness of the House significant since tax measures – by law – emanate from the chamber.

He said the proposal would be dead if the House does not accept it.

Angara added that Congress has to revisit the tax rates, since the last time the legislature reviewed them was in 1977.

“Since then, consumer prices have significantly gone up, eroding the earnings of taxpayers, particularly salaried workers. We have to give them tax relief, which would increase their take-home pay,” he stressed.

“How can a country build its middle class and build a responsible citizenry if you’re overtaxing your citizens? How can they provide for their future for their family?” Angara said.

“Everything is used up on expenses. That explains also why the Philippines has one of the lowest savings rates in Asia,” Angara said.

“If we want to remain competitive with the other countries, we need to make our tax rates at par with them. We need to look at this on a long-term basis,” Angara said.

He and Quimbo were colleagues in the House when he was Aurora representative. They both served as spokesmen of the House prosecution panel in the Senate impeachment trial of former Supreme Court chief justice Renato Corona.

The income tax reduction proposal is contained in Angara’s Bill 2149, which would cut individual income tax rates gradually from the current 32 percent to 25 percent by 2017. Tax rates for corporations would similarly be reduced.

According to the proponent, the country has the third highest individual income tax rate in the ASEAN (Association of Southeast Asian Nations) region, next to Thailand’s 37 percent and Vietnam’s 35 percent.

Indonesia’s highest rate is 30 percent, Malaysia’s is 26 percent, and Laos’ is 24 percent, while Singapore, Cambodia and Myanmar tax their citizens at a maximum of 20 percent.

The Department of Finance and the Bureau of Internal Revenue have promised to look into the income tax reduction proposal but made it clear that they oppose any measure that would result in revenue loss.

DOF Undersecretary Jeremias Paul has said the proposal would mean a loss of P43 billion by 2017 if a separate revenue-generating bill is not passed.

A group of economists led by former budget secretary Benjamin Diokno has been urging Congress to consider reducing income taxes.

However, as a complementary measure, the group is recommending that the 12-percent value-added tax (VAT) be increased to 15 percent on all products, save for essentials like electricity and fuel. Agricultural products in their original state like fish, vegetables, rice and meat are VAT-exempt.

The Diokno group argues that reducing income tax would give people additional disposable income, while increasing VAT would discourage them from spending such income on non-essentials and encourage them to instead save it.  â€“ With Marvin Sy