Presidential candidates asked to state stand on income tax cuts

The Tax Management Association of the Philippines (TMAP) on Wednesday urged those planning to run for President in the 2016 elections to unveil their tax reform agenda and at the same time called on the Aquino administration to bring down income tax rates.

“TMAP challenges those seeking the presidency in next year’s election to bare their stand on tax reform issues. TMAP would like to push for the inclusion of a tax reform agenda in the campaign platform of presidential hopefuls,” the group of corporate tax practitioners and tax consultants said in a statement.

TMAP also said now is the time to adjust income tax brackets and slash tax rates.

Built-in inequity

“TMAP believes that it is high time for the government to address the built-in inequity in the personal income tax system before the term of President Benigno S. Aquino III ends in 2016. Maintaining status quo for the current tax system is no longer acceptable for the working sector, which has endured the impact of inflation through the years,” it said, saying the country has the highest personal and corporate income tax rates in the whole Association of Southeast Asian Nations (Asean).

“Under the current tax system, TMAP observed that the government had been relying on raising revenues through inflation, rather than through efficient tax administration. This is detrimental to salaried workers, which account for about 80 percent of total BIR (Bureau of Internal Revenue) collections from individual taxpayers,” it added.

Withheld taxes

Citing data in the 2014 annual report of the country’s biggest tax-collection agency, TMAP pointed out that P31 billion of the P118-billion jump in the BIR’s take last year were contributed by taxes withheld from salaried workers—the largest contributor to the increase.

As for the Department of Finance’s earlier estimate of P30 billion in foregone revenues if income tax rates were lowered, TMAP noted that the amount would be equivalent to only 2 percent of the BIR’s total collections. Last year, the BIR collected P1.335 trillion in taxes.

“TMAP therefore reiterates its proposal to revise the personal income tax table together with the automatic indexing of tax brackets every three years,” the group said.

Part of TMAP’s comprehensive tax reform proposal pitched to Congress and Senate last year is an all-inclusive tax-exempt annual income threshold of P300,000. At present, a tax base of P10,000 and less is already slapped a 5-percent tax rate.

TMAP had proposed a rate of 10 percent for those earning over P300,000 to P500,000 a year; 20 percent for those earning more than P500,000 up to P1 million; 25 percent rate for over P1 million to P2.5 million; and 30 percent for those earning more than P2.5 million.

Staggered reduction

“A staggered reduction of the tax rates over a period of three years will also help cushion the impact on the government’s revenue targets,” TMAP added.

“What is important at this point is for the government to actually show its commitment toward a progressive, equitable and competitive tax system. More than lip service, the government must agree to sit down and come up with new tax policies and legislation that will address the inherent problems of the system. We know that tax reform will not be a one-shot deal. We expect it to be a long-term process. And TMAP will be more than willing to help the government in coming up with holistic proposals for much-needed reforms in the tax system,” TMAP president Terence Conrad H. Bello said.