By Luis Leoncio
The Senate hopes to lower individual tax payments before the end of President Aquino’s term amid criticisms that services rendered by the government were not commensurate with the increase in tax collections.
Sen. Juan Edgardo “Sonny” Angara, chairman of the powerful Senate Committee on Ways and Means, is behind the move to lower taxes. He also wants a simplified process of tax filing and payment. He noted that the country has a “one-size-fits-all type of tax system” where business tycoons have the same requirements as sari-sari store owners and sidewalk vendors.
The senator said a bill updating the income-tax schedule to reduce tax payments for the poor and middle-class brackets or those earning less than P1 million a year, has a window for enactment “toward the end of this year or the start of next year.”
The bill seeks to apply lasting reforms to the tax system, he said.
Under Angara’s proposal, the lowest tax bracket would be those earning P20,000 and below per annum, who will pay a 10-percent tax, from the current P10,000 and below who are assessed a 5-percent tax.
The top bracket under the bill would be those with an annual income of P1 million or more paying a 25-percent tax, from the current P500,000 and above charged with a 32-percent tax.
In a recent study published by The Market Monitor, former Budget Secretary Benjamin Diokno showed that the Aquino administration is shortchanging Filipinos in terms of services rendered, as compared to taxes collected.
The study showed that the country’s tax effort (or taxes as percent of GDP) was at 14.4 percent last year, while government spending net of interest payments as percent of GDP was 13.2 percent.
This showed that the government collected more taxes from Filipinos than what it gave back to them in terms of public goods, services, and public infrastructure.
“Put differently, the average Filipino paid more taxes to the government than what he received from it in terms of public goods and services,” the study noted.
Angara added that the bill seeks to simplify the tax-payment system in the country for greater compliance and improved collection.
Angara also cited a World Bank-Pricewaterhouse Coopers (PwC) report showing that the Philippines lags even behind Cambodia and Myanmar in the ease of paying taxes.
The report, “Paying Taxes 2015,” said that although the Philippines ranks above the Asia-Pacific average of 229 hours in tax compliance with a system that takes a comparative 193 hours for Filipino taxpayers to comply, the country remains far behind Cambodia’s 173 hours and Myanmar 155 hours.
According to the report, Filipinos also need to make 36 payments to fully comply, compared with 32 payments in Vietnam, 31 in Myanmar, 27 in Brunei, 22 in Thailand, 13 in Malaysia, and five in Singapore.
“While we laud the efforts of the Bureau of Internal Revenue to make taxation more transparent and efficient by implementing the electronic filing and payment system, it seems that many still find the new system more cumbersome and costly with the extra steps they have to take to file and pay their annual income tax,” Angara said.
Angara also noted the glitches on the BIR website and the failure of BIR officials and personnel to assist confused taxpayers.
Angara has been pushing for the simplification of the process of tax filing and payment by minimizing the steps, requirements, forms and fees imposed by the Bureau of Internal Revenue (BIR), citing the Anti-Red Tape Law, which requires all government agencies to undertake “time and motion studies of transactions” to reduce the processing time and bureaucratic red tape.
“We have a one-size-fits-all type of tax system. Business tycoons who own multibillion-peso corporations have the same requirements as sari-sari store owners and sidewalk vendors who may not be compute-literate. This should not be the case,” Angara said.
“Filipinos, in fairness, are ready to comply with the law and pay their tax but are being made to go through a tedious and difficult process and a complicated system,” he added.
“While we laud the efforts of the BIR to make taxation more transparent and efficient by implementing the electronic filing and payment system, it seems that many still find the new system more cumbersome and costly with the extra steps they have to take to file and pay their annual income tax,” Angara said.
“Add to that the glitches on the BIR website and the unfamiliarity of some BIR officials who are expected to assist the confused taxpayers,” he added.