Whoever will be the next president after the May national elections should certify tax reform as urgent and commit to enact a holistic tax reform measure within the first 100 days of their presidency, the Tax Management Association of the Philippines (TMAP) said.
In a statement issued Monday, TMAP said it is also calling on all candidates for Senate and Lower House seats to support and enact needed tax reform measures.
The group reminded the candidates of the urgent need for tax reform due to the inherent inequity in the current personal income tax system, and our uncompetitive corporate income tax rates vis-à-vis the corporate income tax rates of our Association of Southeast Asian Nations (Asean) neighbors the statement said.
“The tax brackets for individuals are outdated, resulting in an unfair regressive system,” TMAP said.
The group pointed out that inflation has eroded the income brackets and has pushed the earnings of salaried individuals into higher tax rate brackets without a corresponding increase in purchasing power.
This has created inequity and has caused the current personal income tax system to be regressive, it said.
At the same time, the tax gap between salaried workers and self-employed individuals and professionals (SEPs) continue to be significant, which further aggravate the unfairness in the tax system.
As of 2014, compensation income earners accounted for 86 percent of total collections from individuals, while SEPs only contributed 14 percent to total collections, the group noted.
Moreover, TMAP said the Philippines effectively imposes the highest personal income tax rate and the highest corporate income tax rate among the Asean-6 countries.
Reducing the personal and corporate income tax rates will make the Philippine workforce and corporations doing business in the Philippines competitive with their Asean neighbors.
“Tax reform, however, is not all about just giving tax breaks and providing tax relief,” the group said.
While there is a need to immediately address the current unfairness and inequity in the system and simplify compliance, a holistic approach to tax reform will have to be undertaken to address any revenue loss from these measures, especially those arising from competitiveness issues, and allow the government to collect more, it added.