The Market Monitor Minding the Nation's Business
If all goes well, the bill lowering individual and corporate income-tax rates is scheduled for plenary deliberations by the House of Representatives this week, following its approval on first reading by the House Committee on Appropriations, Marikina City Rep. Romero Quimbo, chairman of the House Committee on Ways and Means and one of the authors of the measure, said.
Quimbo said his committee, after 11 hearings, issued its recommendation to approve on first reading the consolidated measure lowering individual and corporate tax rates; the committee earlier approved the bill “in principle.”
“We are eyeing approval of the bill at the committee level and the final reading by October,” Quimbo said.
Congress has little more than a month to enact the bill as the election season begins next month when legislators and politicians file their certificates of candidacy with the Commission on Elections (Comelec).
Quimbo said the tax measure seeks to revise income taxes for compensation-income earners, self-employed and professionals, and corporations through the simplification of tiers and rates, and indexation to inflation.
“Tax brackets have remained unchanged since 1997 and have not been adjusted to inflation. And because workers’ salaries have been adjusted for inflation but tax brackets remained frozen, a vast number of workers have been pushed to higher brackets, thus paying higher tax rates,” he said.
“The simpler the tax bracket, the simpler the competition the easier for compliance,” he added.
Under the measure public and private workers earning P180,000 and below would not be required to pay income tax.
In the current setup, those earning P10,000 or less a month pay 5-percent income tax.
Quimbo said the bill also reduces the income-tax rate of those earning above P180,000 to P500,000 and those above P500,000 to P10 million from the current 30 percent to 9 percent and 17 percent, respectively.
He said the highest rate at 30 percent would be paid by those earning P10 million annually. Currently, those with yearly earnings of P500,000 and above pay 32-percent income tax.
Quimbo also said the measure would reduce the corporate income tax (CIT) rate to 25 percent from 30 percent.
The Philippines has the second-highest individual income-tax rate in the region at 32 percent, next to Thailand’s and Vietnam’s 35 percent.
The Philippines also has the highest value added tax (VAT) at 12 percent, as the country’s current individual income-tax bracket has remained unchanged since 1997.
“The P500,000, which is currently taxable by 32 percent, needs to be adjusted, considering that this amount is equivalent to to P1.2 million today,” Quimbo said.
Earlier, Finance Undersecretary Jeremias Paul warned lawmakers that reducing the individual income-tax rates may cause the government to lose revenues of as much as 1.5 percent of the country’s gross domestic product (GDP), or some P30 billion.
“We need to have a compensating measure. It has to be revenue-neutral,” Paul said.
To recover lost revenue, Quimbo said Congress would also approve revenue-generating measures, such as bills raising excise tax on fuel, the fiscal incentives rationalization bill, the proposed Tax Incentives Management Act (Timta), the Customs Modernization and Tariff Act (CMTA), the Rationalization of the Mining Fiscal Regime, and the bill imposing specific tax on sodas and other sweetened beverages in September.