Wage earners continue to carry most of the burden when it comes to personal income taxes collected by the government, the Department of Finance (DOF) said.
In a statement over the weekend, the DOF said 80 percent of the total personal income tax collected by the government came from wage earners, while only 20 percent were sourced from professionals and self-employed individuals.
Finance spokesperson Paola Alvarez said the situation is unfair and necessitates the much-delayed reform in the tax system that aims to broaden the revenue base and generate funds for the government’s accelerated spending on programs to attack poverty and improve living standards.
Alvarez said the disparity worsens when considering that 40 percent of all income comes from self-employed and professionals (SEPs).
The DOF official is referring to result of the combined Family Income and Expenditures Survey and Labor Force Survey, which showed that compensation owners accounted for 60 percent of the income generated from doing business or working in the Philippines, while SEPS accounted for 40 percent.
Alvarez said this calls for an amendment to the bank secrecy law.
“We have high tax rates for self-employed and professionals, yet we have a very narrow base among them. The Bureau of Internal Revenue (BIR), however, cannot fully audit them because of existing bank secrecy laws,” she said.
BIR data show that the share of wage earners in income tax collections in the 1980s was 66 percent and SEPs 34 percent, but the contributions of the self-employed and professionals began to decline that, in the 1990s, they accounted for only 20 percent of income taxes. The share of SEPs declined further to 14 percent beginning in 2000, she noted.
On top of reconfiguring the skewed tax system, Alvarez said the Duterte administration would also lobby Congress to relax the bank secrecy law as a way of flushing out tax dodgers.
“Besides correcting this disparity by lowering income tax rates, Malacañang’s economic team will push for the relaxation of bank secrecy laws for tax fraud cases and the inclusion of tax evasion as a predicate crime to money laundering,” Alvarez said.
“In relaxing bank secrecy laws, we want to cover all types of accounts, whether they pertain to deposits or investments, or to peso and dollar accounts.”
Alvarez said the current administration also wants to include tax evasion as a predicate crime to money laundering to catch the big tax evaders and haul them to court.
She said the DOF is also considering proposing legislation for a final tax amnesty that will be absolute to clear tax dockets.
Alvarez said the government needs to institute tax administration reforms at the Bureau of Customs and BIR.
Budget reforms should also be carried out to improve spending, ensure transparency and generate savings efficiently, she added.