We need a major tax reform, Mr. President!

The “AlDub” phenomenon is sweeping the nation. Another melo-drama feeding our Filipino-Latino soul which none of our political candidates can even beat. The sad reality is that many of the Filipinos are glued right now to the “AlDub” series and no one seems to be bothered anymore about our country’s gloomy condition. After all the frustrations we have on our public servants have we become a passive, non-committal, numb nation? Have we grown callous to the problems that beset our country and our people?

We worry over trivial matters, bicker about the problems we encounter on our day to day existence but fail to resolve the bigger issues that continue to haunt us. On second thought, Eat Bulaga’s “AlDub” euphoria may be giving us a break from the hustle and bustle of our daily grind and from all the bad news we hear. But let’s not fancy too much, we need to push ourselves to elevate our standards to become a great nation.

The most pressing issue for me right now is the problem we all have in paying tax. There is a public clamor for Congress to pass a law reducing income tax rates. Marikina Representative Romero Quimbo, chairman of the House Committee on Ways and Means, has filed House Bill 4829 seeking to adjust the levels of taxable income brackets and the corresponding base amount of tax for compensation income earners based on updated Consumer Price Index (CPI).

At least three bills seeking to lower individual tax rates by as much as 15 percent have been filed at the House. Aside from Quimbo, Valenzuela Representative Magtanggol Gunigundo and Pasig City Representative Roman Romulo also filed their respective versions of the measure. Senator Sonny Angara has also filed a bill seeking to adjust individual income tax brackets. By 2017, Angara’s bill seeks to lower tax rates to 10 percent from 15 percent for those earning between P20,000 to P70,000 and to 25 percent from the current 32 percent for those earning over P1 million.

Sadly, the President has opposed the proposal stressing that there is still no need to introduce a new tax measure. He said that he was not convinced that cutting the income tax level would be a good move right now.

In a study conducted by former Secretary General Romulo Virola of the National Statistical Coordination Board, over 74.7% of the population comprises the lower class, while 0.1% families constitute the upper class, the remaining 25.2% fall within the “middle class” or the 4.7M families with 5 members. They are the group who is heavily taxed in the Philippines.

The Philippines has the highest income tax rate among Southeast Asian countries at 32 percent. In our neighboring countries, an annual income equivalent to P500,000 is taxed at: 0% in Brunei, 0% in Singapore (for the first $20,000 or P654,400), 10% in Malaysia, 25% in Laos, 20% in Vietnam, 20% in Cambodia, and 32% in the Philippines.

Allow me to illustrate the tax impact to a middle class family. For a couple with two kids and the husband is earning P25,000/month and the wife is earning P20,000/month how much would their tax be? In the current income tax rate, the husband will be paying P3,112.89/month and the wife will be paying P2,904.56/month. The husband after tax and other deductions such as, SSS premium of P581.30, PhilHealth P312.50, PHIC (Pag-ibig) P200 will have a net monthly pay of P20,793.31 or P249,519.73/year. The wife after tax and deductions of P581 for SSS, P250.00 for PhilHealth and P200 for PHIC or Pag-ibig will take home P16,064.14/month or P192,769.73/year. Total combined monthly income is P36,857.45. Then they have to pay for the utility bills, school tuition, school bus, food, house rental, transportation, household help etc., etc. After all expenses, what is there left to save? If tax on compensation income starts after P250,000, the annual saving for this couple will be P72,000. This is more than enough money to save for the rainy days or for the college education of their children.

Our income tax rates are stuck in 1997 levels. During that time if you are earning P500,000, your tax rate is 32%. Today, whether you are earning P500,000 or P1,250,000, you are taxed the same. Isn’t it about time for the government to consider income brackets based on current purchasing power? This means that if you were earning P500,000 in 1997 and taxed at 32%, this time with the same amount you should only be taxed at 20%. The tax rates can be maintained but the value of taxable income must be raised. Raising income brackets would translate to a higher take-home pay for a worker.

All this time we have been paying such high premiums and yet we continue to get poor and inefficient service. Where is justice in this situation?

According to records, we have 23 million earning individuals but only 5.6 million of them pay taxes. The rest are either exempted because they are minimum wage earners or they do not pay taxes at all. It is only those receiving salaries every 15th and 30th of the month who pay taxes religiously. But we must remember that those getting minimum wage also belong to this group. So, in reality only 18 percent of the working population pay tax. The rest have remained a burden to society.

Sec. Purisima and Commissioner Henares say that it is not the right time to reform the income tax system. Most of us who fall under the middle-class or lower middle-class classification have been hurting for so long now. When is the right time?

Congress said last week that it can no longer tackle the proposal to reduce individual income and corporate tax rates because the bill is still with the committee on ways and means. Majority Leader Neptali Gonzales II said that the remaining weeks before the House and the Senate go on their first recess after their third and last regular session on July 27, will be devoted instead to discussing and approving the proposed P3.002-trillion 2016 national budget. Sanamagan! Where will all these money come from? From our sweat and tears! And we clearly know that most of our tax-money is stolen or used to make government officials richer than ever while we continue to ride dilapidated trains, fall in line under the scorching heat of the sun to file for government permits and licenses, ride through rough roads, get sick from pollution and poor sanitation around the country.

We need tax reform badly. We are all suffering. Nothing’s left in our pockets especially when you add up other local government fees and our personal expenses to live a decent not even comfortable life. Let us not give up and I pray that our “good” senators and congressmen who still have some compassion for the Filipino people will not give up on this fight.