A senator who has championed tax reform has welcomed the incoming Duterte government’s intentions to reform the income tax system, and has reiterated his vow to continue pushing for income tax reform in the 17th Congress.
“We very much welcome presumptive president Rodrigo Duterte’s plans of improving the country’s income tax system to make it more progressive and equitable. We’ve been pushing for this reform since I was elected senator in 2013,” Sen. Sonny Angara, chairman of the ways and means committee, said on Friday.
Angara’s initial proposal, Senate Bill (SB) 2149, which was filed in February 2014, aimed to lower income tax rates across-the-board, reducing the highest tax rate from 32 percent to 25 percent, and to compress the tax brackets from seven to five.
Subsequently, in November of last year, he filed SB 3003 that seeks to adjust the levels of taxable income to take into account inflation.
The senator at the time said that given the short remaining term of the Aquino Administration, SB 3003 was a more viable proposal and should be the minimum position the government can take in reforming the country’s tax system.
Under the National Internal Revenue Code of 1997, individuals with taxable income of over P500,000 are taxed a fixed amount of P125,000 plus 32 percent of the excess over P500,000.
At present, the Philippines has the second highest individual income tax rate at 32 percent in the Asean region, next to Thailand and Vietnam’s 35 percent.
“P500,000 in 1997 does not have the same value today due to inflation. P1 in 1997, when adjusted for inflation, is now worth only 44 centavos. Our workers are being excessively taxed. And worse, despite an increase in their salaries, some of our workers will make less money in real terms than in 1997 because of inflation and as a result of being in a higher tax bracket,” the lawmaker explained.
“We’ll definitely support incoming president Duterte’s plan to immediately revisit the decades-old individual income tax scheme within the fir st 180 days of his administration,” he added.
President Aquino and his economic managers did not support proposals to lower income tax rates citing a possible P30-billion revenue loss, whereas Angara pointed out that tax reform could have already been undertaken earlier given hundreds of billions of pesos in government underspending.
The proposed measures also did not pass the House of Representatives, which prevented the Senate from making progress as the Constitution’s origination clause provides that all revenue measures must originate from the Lower House.
“Economists and experts have all agreed that there is an urgent need to change the country’s current tax system given how outdated, unfair and uncompetitive it is. This long overdue reform is a perfect example of Duterte’s brand of ‘change is coming,’” Angara said.
“If we want change, let’s support this proposed bill, which intends to give every Filipino families decent lives, not to enrich the government,” Angara added.