A provision in the proposed tax reform package that seeks to exempt micro businesses and marginal income earners from income tax is expected to help small business to grow and encourage the self-employed and professionals to comply with their tax obligations, according to a senator.
Sen. Juan Edgardo Angara, who heads the Senate Committee on Ways and Means, on Friday said he considers the provision as a very good proposal since it would not involve imposing tax on small businesses, giving them a chance to grow and provide employment opportunities.
Under current tax regulations, marginal income earners are self-employed individuals deriving gross sales or receipts not exceeding P100,000.
Among them are farmers and fisherfolk selling directly to consumers, small sari-sari (variety) stores, small eateries (carinderia or turo-turo) and drivers or operators of a single tricycle.
Currently, marginal income earners are exempted from paying business taxes such as value-added tax and percentage tax but are still subject to income tax.
Micro businesses with assets below P3 million may be exempt from income tax, pursuant to the existing Barangay Micro Business Enterprise Law but they need to register first at the City Office of the Treasurer in their area.
“By automatically exempting, in effect, marginal income earners and micro businesses from income tax, we would finally afford them equal protection and benefits that the minimum wage earners have long been enjoying,” Angara noted.
The proposed tax bill, which had been approved by the House of Representatives, also made distinction between compensation income earners and the self-employed or professionals.
The Department of Finance seeks to impose a one-time flat tax on self-employed and professionals so as to encourage these hard-to-tax individuals to voluntarily and timely comply with their tax obligations.
The proposal is seeking to simplify the tax system that would encourage taxpayers to pay the correct taxes, raising revenue collection.
Angara said he will study various proposals on how to reform the tax regime for the self-employed and professionals so that they would ultimately benefit the small businesses.
The tax reform package proposal has been certified as urgent by President Rodrigo Duterte, and the Angara committee is committed to speed up the process but without sacrificing the quality of the tax law.