Binay to plug revenue loss from income tax exemption
Vice President Jejomar Binay on Thursday said he would go after smugglers and sell government assets to plug in the estimated P30-billion revenue loss in exempting lower income earners from taxes.
Binay’s communications director Joey Salgado in a statement refuted the Liberal Party coalition spokesperson Romero Quimbo’s claim that Binay’s proposal would cut by half or P113.4 billion the total tax revenue.
“Our detractors will always find reasons to reject a move that will improve the lives of those in the below-middle class and the middle class levels,” Salgado said.
Binay first made such proposal during his proclamation rally in Mandaluyong on Tuesday, giving rosy promises of exempting those earning P30,000 or less from income tax and giving free social services to the poor.
Salgado chided the administration coalition by saying they come from the more affluent families who want middle income earners to pay the same taxes as millionaires.
“This is no surprise as they come from a group whose knee-jerk reaction is to protect the status quo where factory workers, government employees and call center agents pay the same taxes as millionaires. This is the mark of an insensitive leadership,” Salgado said.
Salgado said Binay’s proposal would bring tax relief to almost six million public and private sector employees.
“With the current taxation system, up to 85 percent of the total collection of individual income taxes is paid by the working class while only 15 percent comes from self-employed individuals and professionals. Tax reform would result in the improved competitiveness of Philippine corporations and their workforce. It will also encourage more foreign investments, resulting in more jobs for our people, and more revenues for the government,” Salgado said.
The United Nationalist Alliance’s statement also quoted Binay’s economic adviser, former finance secretary Margarito “Gary” Teves, who said there are other revenue-generating measures to plug in the revenue hole brought about by tax exemption.
“Raising VAT (value-added tax) is not the only way to compensate the revenue loss. We already have a menu of options to compensate for the potential revenue losses from reducing tax rates,” Teves said.
These sources include the sale of government assets and the privatization of a number of government-owned and -controlled corporations; approval of revenue-generating measures, including Fiscal Incentives Rationalization; fuel marking to fight oil smuggling and continued improvement in tax administration and collection efficiency, Teves said.
The Binay camp believed the estimated P30 billion loss from exempting the lower income earners from taxes would be offset by cracking down on smuggling which cheats government hundreds of billions a year.
The Binay camp added that at least P230 billion per year are lost from agricultural products smuggling, P30 billion from oil smuggling and P12 billion from tobacco smuggling.
“The Bureau of Internal Revenue (BIR) and Bureau of Customs’ actual collections are always below target, not to mention the number of court cases lost by the BIR for failing to follow the tax code. Also, several studies have shown that the likelihood of tax evasion increases with higher tax rates,” Teves said.
The opposition camp said that if Binay wins the presidency, he would convene the Legislative-Executive Development Advisory Council within the first 100 days of his administration to craft the tax reform bill.
Binay promised to certify the bill as urgent so that Congress can ensure its swift passage.
The Philippines has one of the highest income tax in Southeast Asia at 32 percent for individual income earners, only next to Thailand and Vietnam. The country also has the highest VAT at 12 percent.
Furthermore, the Philippines has the highest corporate income tax at 30 percent.
“Our tax system must be seen as fair. Those with bigger paychecks ought to pay higher taxes than those who earn less, and inflation-adjusted tax bracket is only just,” Salgado said.
“The resulting tax savings will help Filipino families afford a house, therefore less informal settlers; an education plan for their children, causing less drop-outs in schools; and a retirement plan that will have less senior citizens dependent on charity or the government. The reduction in taxes will result in greater consumer spending which will in turn generate more taxes,” Salgado added. RAM