The Department of Finance (DOF) is pushing the Bureau of Internal Revenue (BIR) to widen the scope of its Large Taxpayers Service (LTS) Unit coverage to generate more revenue and make up for the drop expected from the government’s proposed lower tax rates.
Lowering the income tax rate is a part of the new administration’s 10-point economic agenda that seeks to make tax administration more progressive by updating the income tax brackets and indexing tax collections to inflation. This should reduce the burden on ordinary workers.
“At the BIR, the largest loophole appears to be the Large Taxpayers Unit,” Finance Secretary Carlos Dominguez 3rd told an investment forum in Makati City on Tuesday.
Dominguez stressed in his keynote speech at the Financial Times-First Metro Philippines Investment Summit that the LST unit, which collects from the biggest industries, can increase the efficiency of its collection.
“It should be possible to raise enough revenues at least to compensate for the lower tax rates,” even though it covers only about 2,800 companies, Dominguez said.
The latest data showed that collections from LTS for the first five months of the year reached P402.45 billion, up by P40.44 billion or 11.17 percent from a year earlier.
For full-year 2015, the BIR collected P881 billion through the LTS, a 6.97 percent increase from the P824 billion netted in 2014.
“We are going to put more effort in tax collections and the biggest yields you get are in the relatively large taxpayers. I cannot see why there are only 2,800. It should be more than that. The BIR should expand that number,” Dominguez said.
The Finance chief said the government will be aggressive with this agenda.
“We expect more compliance. And we will be very happy if they just cough up the money that they owe us,” he said.
Dominguez previously said the changes in the tax system would reduce the “tax bite” on ordinary workers.
“These tax tables were made years ago when P500,000 was worth more than what P500,000 is now. So now, if you earn P500,000, automatically you are taxed 32 percent.
And if you spend, say, 80 percent of the remainder, you are taxed another 12 percent from VAT [valued-added tax],” he said.
“The tax bite should be lower for those earning P500,000 today because that is less in real value to what the value was when the tax tables were made,” Dominguez explained.