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Passage of bill lowering income tax rates by 2016? Possible, Belmonte says

Posted On 2014 Aug 23
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Speaker Feliciano Belmonte Jr. delivers his speech at the opening of the Second Regular Session of the House of Representatives at the Batasang Pambansa Bldg. in Quezon City on Monday morning (July 28, 2014). (MNS photo)

Speaker Feliciano Belmonte Jr. delivers his speech at the opening of the Second Regular Session of the House of Representatives at the Batasang Pambansa Bldg. in Quezon City on Monday morning (July 28, 2014). (MNS photo)

MANILA (Mabuhay) – As calls for the government to cut income tax rates gain ground, Speaker Feliciano Belmonte Jr. on Tuesday raised the possibility of the House of Representatives passing a legislation lowering income tax rates by 2016.

In a text message, Belmonte said the House is currently studying proposals to adjust income tax brackets since “inflation greatly affected the rates.”

When asked if it’s possible for the lower chamber to approve a bill reducing tax rates during the 16th Congress, Belmonte said: “If there’s already a draft prepared by a qualified body, baka puede.”

At least three bills seeking to lower individual tax rates by as much as 15 percent have been filed at the House. The House ways and means committee chaired by Marikina City Rep. Romero Quimbo is set to begin deliberations on these proposals next week.

The Philippines has the highest income tax rate among Southeast Asian countries at 32 percent.

Quimbo expressed confidence that the House will be able to approve a measure reducing income tax rates during the 16th Congress.

“I am very optimistic it will pass under my watch as chair… I am an author myself of a bill [to] comprehensively review and lower tax incidence,” he said in a separate text message.

Majority Leader Rep. Neptali Gonzales II, however, aired his reservations about the proposal to cut income tax rates, saying the House should study first where it will source the revenue that will be lost as a result of reduced income tax collection.

“[Kapag pinag-isipan ang pagbaba ng income tax rate], ang unang magiging tanong diyan ay magkano ang mababawas mula sa gobyerno at papaano babawiin ‘yun considering that the government is not engaged in business? Kailangan ring bawiin ng gobyerno [yung perang mawawala] in one way or another,” he said.

Bureau of Internal Revenue Commissioner Kim Henares has warned that the government stands to lose as much as P43 billion in tax revenues by 2017 if income tax rates are lowered by January 2015.

In the Senate, Sen. Juan Edgardo Angara has filed a bill seeking to adjust individual income tax brackets starting next year. 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.

House Appropriations Committee chair Rep. Isidro Ungab said the government will also have to consider if its tax revenues are adequate to meet its spending obligations.

“Of course, a lower tax rate is indeed desirable. But let’s ensure that we have a sufficient… [and] balanced budget. After we achieve that, let’s consider and study calls for lowering tax brackets—whether [these] will be consistent with a sound tax system,” he said.

To address the projected loss of government revenue from lower income tax rates, Quimbo said his panel is also working on legislating revenue-generating measures.

“We will also pass other measures to recover revenue from mining, [as well as impose] excise taxes on carbonated [drinks],” he said.

The Tax Managers Association of the Philippines (TMAP) has thrown its support for cutting income tax rates, saying both businesses and workers stand to benefit if these are reduced.

The group, which counts consultants for the country’s top 1,000 corporations among its members, said in a position paper released last week that lowering income tax rates will provide individuals with more disposable income. This, it noted, will result in economic growth and better living standards for Filipinos.

“TMAP supports a reduction in income tax rates. The top individual income tax rate, should at the very least, be the same as that for corporations (30 percent) or even lower,” it said.

Under the existing system of progressive taxation, individuals with a taxable income of at least P500,000 annually are considered to be in the top tax bracket and are taxed 32 percent.

In contrast, the tax rate for the same amount in Cambodia and Vietnam is 20 percent, while Laos’ is at 12 percent. The tax rate in Malaysia is only 11 percent, Thailand 10 percent, and Singapore 2 percent. Workers in Brunei, meanwhile, do not pay any income tax.

TMAP has also recommended that workers in the lowest tax bracket or those defined as “marginal income earners” should no longer be taxed. At present, even those who earn P10,000 are taxed 5 percent.

Copies of the position paper have been sent to Angara and Quimbo. (MNS)

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