As much as an P11,000 reduction in annual income tax dues for individuals earning at least P15,000 a month has been proposed in the House of Representatives.
The proposal was made in House Bill 4099 filed by Rep. Magtanggol Gunigundo of Valenzuela City (Metro Manila) that seeks to lower the current 32 percent income tax for individuals and the current 30 percent income tax for corporations.
Under Gunigundo’s measure, the income tax rates for individuals will depend on the amount of their net taxable income while the corporate income tax rates will be pegged at 15 percent of the company’s gross profit.
This means that an individual, who is either single, married or head of the family, with no dependent and has an annual net taxable income of P130,000, would only have to pay P9,500 in income tax per year—an amount P11,000 less than the P20,500 collected by the government at present.
A married person with one dependent and an annual net taxable income of P105,000, on the other hand, would only have to pay P7,000 in income tax per year—an P8,500 reduction from the existing P15,500.
The annual income tax rates for individuals further go down as the number of their dependents increases. A married person with two dependents would only have to pay an annual income tax of P4,500 instead of the old P10,500. A married person with three dependents would only have to part with P4,000 in income tax instead of the old P6,250.
A married person with four dependents would only have to pay P1,500 in annual income tax instead of P2,500.
Also, the annual income tax rates will be lower for those who earn P280,000, P430,000, P580,000, P730,000 and P1 million a year.
A uniform annual income tax rate of 15 percent from a company’s gross profit, Gunigundo said, would streamline the process and encourage those in the informal sector to join the mainstream circle and even foreign investors to put their capital in the country.
Under the current system, the annual income tax expense of a company is computed by subtracting a number of items from its gross profit such as selling and administrative expenses, interest expense and other financing charges, interest income, income from acquisition of assets at fair value, reversals on impairment of non-current assets-net, other net incomes and income before income tax.
Gunigundo, however, conceded that his proposal will reduce the government’s tax collection by as much as P90 billion.
He, however, said P90 billion cannot be treated as government loss “because we can revise our (revenue collection) targets.”