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THE Senate bills aimed at granting more tax
exemptions to individuals are expected to cause a big dent on the
government’s fiscal consolidation program, the Department of
Finance (DOF) said.
In a position paper, the DOF said
foregone revenues from the various Senate bills are estimated to
range from P11 billion to P43 billion.
“The numbers are quite huge and
will definitely cause a big dent on our fiscal consolidation
program,” Finance Undersecretary Gil Beltran said.
“However, in consideration of
the noble objective of the proposals, we are open in finding and
formulating a middle ground proposal which will grant financial
relief to individual tax payers without jeopardizing the national
government’s fiscal target,” he said.
The DOF official said the
department is constrained from supporting the various proposals in
their present form.
The Senate bills include the
proposal to increase personal and additional exemptions of
individual taxpayers or Senate Bills 125 and 126 authored by Sen.
Juan Ponce Enrile. These two proposals, if passed as is, would cut
government revenues by P14.41 billion and P37.98 billion,
respectively.
Senate Bills 1615 and 1616,
authored by Sen. Richard Gordon, propose to introduce a new
individual income tax schedule and personal exemption level. Their
passage would result in foregone revenues of P11.15 billion and
P43.33 billion, respectively.
Income tax revenues represent
19.98 percent of the Bureau of Internal Revenue’s (BIR)
collections. Out of the total, the withholding tax on wages
contribute the largest at 81.19 percent, or P105.89 billion.
Self-employed individuals contribute 15.12 percent.
At present, the country has seven
taxable income brackets with tax rates increasing progressively
based on income. The rates range from 5 percent to 32 percent.
Individual taxable income is net
of the taxpayer’s personal exemption corresponding to his status
and additional deductions for qualified dependents of no more than
four children.
Self-employed individuals also
enjoy the same benefits besides being allowed to deduct from their
gross income all business related expenses. Compensation income
earners are subject to final withholding tax.
The DOF supports the proposal to
exempt minimum wage earners from the payment of income tax, which
would give them the immediate financial relief without compromising
the national government’s financial capacity.
Last year, the agency through BIR
regulations exempted middle-wage earners in the private sector and
their counterparts in the government service from the withholding
tax system.
“While we have also estimated a
potential revenue loss amounting to P950.72 million per annum, this
is well within the government’s fiscal ability fund,” Beltran
said.
The DOF is also pushing for the
adoption of the simplified net income tax system (SNITS) for the
self-employed and the professionals.
“As an efficiency measure, we
expect a revenue gain from this reform which we estimated to be
about P6 billion annually,” Beltran said.
The second phase of the reform
would involve extending tax relief to the low and middle income
group taking into account the financial capability of the national
government.
 --Maricel
E. Burgonio
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