High income tax to eat up wage increase — lawmaker

MANILA, Philippines - The high income tax workers are complaining about will eat up the planned salary increase for the 1.5 million government personnel, Isabela Rep. Rodolfo Albano lll said yesterday.

“A large part of the increase will just go to income tax. The pay hike plan will be more meaningful if it is accompanied by a reduction in income tax,” he said.

For many government employees, he said the adjustment “will push them to higher tax brackets, which means that their income tax payments will go up.”

He pointed out that those who would receive P500,000 a year or P41,667 a month will pay the maximum rate of 32 percent.

“A Teacher lll or a principal will get this rate with the salary increase. They will pay the highest tax and will be in the same bracket as those earning millions a year,” Albano said.

This is the reason why the Department of Budget and Management (DBM), in submitting the salary increase bill to Congress, proposed a 14th-month midyear bonus and a yearend performance bonus of up to two months salary, he added.

“That is because bonuses of up to P82,000 are tax-exempt under a law recently passed by Congress. I hope that most government workers have P82,000 in bonuses,” he said.

Leyte Rep. Martin Romualdez said the administration should have supported proposals in the House of Representatives and the Senate for the reduction of income tax.

Congressional leaders have shelved the measures because of President Aquino’s repeated opposition to lower income tax. Proponents have vowed to pursue their proposals under a new president and a new Congress.

According to the Tax Management Association of the Philippines, workers who used to pay 10 percent in income tax now pay 20 percent because the rates have not been adjusted.

Finance and revenue officials, who, like Aquino, are opposed to lower income tax have claimed that it would cost the government about P30 billion.

In reaction to such claim, Bayan Muna Rep. Carlos Zarate has proposed the scrapping of just one expenditure item in the 2016 national budget to allow Aquino to agree to the reduced income tax proposal.

This is the P30-billion guarantee fund for private businessmen with government contracts, Zarate said.

“This huge amount will go to private pockets. If we scrap it to offset the projected revenue loss of P30 billion, millions of taxpayers will benefit,” he said.

Finance Secretary Cesar Purisima has recommended the use of such fund to pay the billions in claims of two private companies.