A lawmaker on Thursday said a tax measure that the House of Representatives had passed on second reading on Wednesday night would further concentrate wealth among the rich.
The proposed Passive Income and Financial Intermediary Tax Act (Pifita), the fourth package of the government’s Comprehensive Tax Reform Program, seeks to lower passive income tax from 20 percent to 15 percent.
“This is a clear indication that the bill is a self-serving measure that would only operate to further concentrate the wealth on the rich, thereby defeating the purpose of taxation which is the redistribution of wealth,” Bayan Muna Rep. Carlos Isagani Zarate said in a statement.
Passive income is income derived from any activity in which the taxpayer has no active participation or involvement. These are earnings derived from royalties and bank deposits.
In her sponsorship speech, Nueva Ecija Rep. Estrellita Suansing said the measure seeks to make taxes on passive income and financial intermediaries “simpler, fairer, more efficient and regionally more competitive.”
“In comparison with our (Southeast Asian) neighbors, the passive income tax rates in the Philippines remain among the highest. This is why our capital market remains shallow and uncompetitive, and continues to lag behind our neighbors,” she said.
The country’s present tax system on the financial sector also imposes difficult administration and costly compliance steps, according to Suansing, adding that the Philippines was one of the few countries still levying a tax on initial public offerings.
“It is a deterrent to public listing, resulting in the Philippine Stock Exchange lagging behind its neighbors in terms of market capitalization,” Suansing said.
With the Pifita, interests, dividends and capital gains will be levied a unified tax rate of 15 percent, while preneed, pension and life insurance will be levied a uniform 2 percent.
Various nuisance documentary stamp tax rates will be removed, according to the bill.
“Ultimately, the poor and middle class will enjoy a net gain on their savings… Meanwhile, the rich who receive dividends will have to pay more in taxes,” Suansing said.
But according to Zarate, the Pifita “only serves and protects the rich and their riches as the (Tax Reform for Acceleration and Inclusion) law wreaks havoc on the lives of the common people.”