Dominguez says possible through improved tax policy
The government can collect up to P726 billion or 6.44 percent of the country’s gross domestic product (GDP) by improving the Bureau of Internal Revenue’s (BIR) tax administration and policy, according to the Department of Finance (DOF).
“We can collect around P726 billion or 6.44 percent of GDP if we simplify, address inefficiencies, and remove loopholes in the BIR tax administration and tax policy,” Finance Secretary Carlos Dominguez 3rd said in a speech during a tax congress last week.
He cited the need to relax the bank secrecy law for tax fraud cases, making tax evasion a predicate crime to money laundering; automate electronic filing and payment; reduce the number of pages and fields in tax forms; prepare simpler forms for micro and small taxpayers; expand the large taxpayer service from 2,000 to at least 3,000 large corporations; and hire young Filipinos of competence and integrity to fill the 10,000 vacancies at the BIR.
The DOF chief noted the new administration is focusing on making tax payments simple and easy.
“We are looking at further segmentizing our taxpayers by including a Medium-Sized Taxpayers Division to better address the needs of these taxpayers,” he said.
“We are simplifying the process of paying taxes and changing the mindset of BIR employees to make them service-oriented and more customer-friendly,” he added.
In a separate statement on Wednesday, the DOF said close to 4.7 million taxpayers who earn P250,000 or less per year will no longer have to pay the personal income tax starting 2018 under Package One of the comprehensive tax reform program submitted to the Congress.
Another half-million plus taxpayers earning between P250,000 and P400,000 will pay taxes equivalent to only 20 percent of their incomes in excess of P250,000, under the same tax plan.
These beneficiaries represent four-fifths—or four out of every five taxpayers—of the total tax base of individual taxpayers, according to BIR data as of 2013.
Package One covers cuts in the personal income tax (PIT) rate under a simplified, modified gross income system, plus revenue measures to offset the losses from PIT reductions.
“Without reforming our tax system so that it becomes fairer, simpler and more efficient, government cannot undertake the volume of spending required in achieving our goals” of reducing poverty from 26 percent to 17 percent in six years and elevating the Philippines to the status of a high-income country in one generation,” Dominguez said.
Reducing the personal income tax rate from 32 percent to 25 percent would be done over a two-year period to benefit most taxpayers except the “ultra-rich,” who are defined as individuals earning P5 million or more annually, he said.
Dominguez noted the general rule behind the administration’s income tax reform plan is for the rich to pay more while poor and low-income Filipinos pay less or none at all.
Data from the BIR showed almost 40 percent of the 4,659,173 taxpayers who will benefit from income tax exemptions beginning 2018 are minimum wage earners.
They comprise a little more than a third of the 5.6 million individual taxpayers, the DOF said.