Taking away as much as 32 percent of the monthly income of salaried employees is an injustice particularly in a situation where what you get back is inefficient service like bad roads and unsafe public transport system.
Despite backlogs in public services, we see public officials prioritizing renovation of their offices upon appointment over the repair of leaking roofs and public toilets.
Officials in luxury vehicles with security escorts overtake dilapidated public jeepneys and buses that ordinary employees take on their way to work.
This is why the proposal in Congress to reduce individual and corporate income taxes looks like a sensible idea.
The ways and means committees of both the Senate and the House are taking up bills seeking to reduce personal income tax rate to 25 percent. The seven-point reduction means roughly 22 percent of what is deducted from the monthly payroll.
Income tax rates currently range from five percent for employees earning P10, 000 a year to 32 percent for those earning at least P500,000 annually.
The proponents of the tax reduction bill said the proposal was in preparation for the Asean integration and consistent with the country’s commitment to the Asean Economic Community blueprint, which seeks to transform the organization into a single market and production base by December 2015.
The Philippines has the third highest individual income tax rate in the Asean, next to Thailand’s 37 percent and Vietnam’s 35 percent.
Keeping just 20 percent of nearly one-third of one’s monthly earnings can go a long way for a family that has become used to stretching the household budget to have little luxuries like dining once in a while in a fancy restaurant, or spending a long weekend on an out of town trip once a year.
It will give them more purchasing power that will go back to government in other forms of taxes.
But with very high income tax rates, little or nothing is left for savings. When emergencies come, the highly-taxed salaried employees resort to borrowing. Having loans to pay means a dent in their budget for other necessities in the months ahead.
Do we really have to pay that much income tax?
If only the taxmen are doing their job well, we should not. But we have a system where taxmen rely heavily on withholding income taxes that are automatically deducted from the take-home pay of salaried employees.
Take a look at the revenue targets of the Bureau of Internal Revenue (BIR) this year. Overall, the tax agency aims to collect P1.46 trillion by year end. Income taxes account for 58.6 percent or P855.8 billion of total while P325.7 billion will come from value-added tax, and P124.2 billion or 8.5 percent from excise tax as a result of the sin tax reform law that imposed higher taxes on tobacco and alcoholic beverages beginning January last year.
In spite of its intensified campaign against tax evasion, the Bureau of Internal Revenue (BIR) has barely made tax-evading professionals conscientious in paying their tax dues. The reason we often hear is that the taxes they would pay would only end up in the pockets of corrupt government officials and employees.
Until July, the BIR has failed to meet the monthly collection targets. The reason for missing the targets was the slowdown in government spending and business activity as a result of delays in the release of goods from Manila’s congested ports.
In April when the monthly tax takes should have been highest because of the April 15 deadline for many tax payments, BIR managed to collect only P156.1 billion against the P176.5 billion target.
Given the worsening situation in the ports as the Christmas season nears, the prospect looks dim for the tax agency to collect more.
But as the government’s tax generating agencies crawl in meeting their target collections, complaints increased about the outrageously disproportionate amount of “for the boys” against receipted tax payments even in small and medium-sized businesses.
This happens not only in the BIR but also in the local treasury offices which are under the Department of Finance (DoF).
Just a few weeks ago, a relative was fuming when her company was billed P370, 000 in tax but was told to advance P300, 000 “for the boys” and the receipted P70, 000 could be paid later.
How can taxpayers be encouraged to pay the right amount of taxes when the collectors themselves are already stealing a huge part of the amount being paid at source?
Can they at least moderate their greed?
The BIR should prioritize and be serious in checking the lifestyle of its own people. Jail those found living beyond their means to show examples to tax evaders that it really means business.
The BIR should start the campaign against tax evaders in its own backyard so that ordinary employees and small businesses would not feel being overtaxed.
Comments are welcome at firstname.lastname@example.org