Lowering or even removal of withholding taxes of salaried workers is actually “long overdue,” according to a research think tank.
Ibon Foundation recently said President Benigno Aquino 3rd should not block a pro-people proposed measure by advancing the idea that it will result in losses in government revenue.
“Revenue losses can be compensated by more determined collection of taxes on rich families and large corporations,” Ibon asserted.
Leaderships of both Houses of the Philippine Congress were reportedly not abandoning the plan despite Aquino’s strong opposition to tax cuts.
Wilson Fortaleza, spokesman for PartidoManggagawa (PM), argued that revenue deficit should never be used as a reason not to pursue a legal policy that favors low income families because it is tantamount to “hold-up.”
Fortaleza said PM always believes that the burden of paying big taxes should not fall on poor people but on rich ones.
Sonny Matula, president of Federation of Free Workers (FFW), said the passage of a proposed law that will increase the number of those to be exempted from withholding taxes is a big help to the economy.
Matula, a labor lawyer, added if the many people will have more money, then more products and services will be bought by the workers that will end up as taxes that will be collected by the government.
According to Ibon Foundation, “around 5 to 6 million Filipinos and their families are being doubly burdened by higher taxes and by having incomes eroded by inflation. The prices of goods and services increased by at least 110 percent between 1997 and 2012 [based on the]Bangko Sentral ng Pilipinas [BSP] data.”
“Individual income tax brackets have remained unchanged since 1997 and been overtaken by rising incomes. The nominal income of the lowest-earning 70 percent of Filipinos increased by 137 percent between 1992 and 2012, according to the latest Family Income and Expenditure Survey (FIES).”
“This unduly brought many low- and middle-income families into higher income tax brackets, even up to the highest bracket charging 32 percent,” the group said.
Ibon pointed out that the Aquino government’s refusal to lower income taxes because of its chronic budget deficit defers to elite economic interests.
“Any revenue losses can be immediately compensated by more aggressive collection of corporate income taxes and, for instance, more effective collection of estate taxes on wealthy families,” it said.
Ibon revealed that there are about P780 billion in potential tax revenues from firms especially from large corporations in 2012 yet only P371 billion was actually collected by the Bureau of Internal Revenue (BIR) in that year.
Additionally, the country’s wealthiest families pay only a few hundred million pesos in estate taxes every year, allowing them to accumulate trillions of pesos in wealth over the decades, it said.
“Lowering income taxes for the majority of families can be the start of more wide-ranging income tax reforms, the group added.
Personal income taxes on the richest will eventually need to increase and the system of corporate income taxes also needs to be revised with micro, small and medium enterprises given support through lower income taxes compared to large corporations, Ibon said.
NELSON S. BADILLA