Finance Secretary Carlos Dominguez. INQUIRER FILE PHOTO
Finance Secretary Carlos Dominguez on Monday said the move to lower income tax rates for personal and corporate income could cost government some P173.8 billion annually in revenue losses.
During the Development Budget Coordinating Committee meeting at the House of Representatives on Monday, Dominguez was asked by Albay Rep. Edcel Lagman if the move to lower income taxes could result in government revenue loss.
Dominguez earlier bared his proposal to gradually lower personal income tax from 32 percent to 25 percent and to lower corporate income tax from 30 percent to 25 percent.
READ: DOF eyes phased cut in income tax rates
Dominguez had said the finance department planned to do this in a period of two to three years.
During the hearing, Dominguez admitted that lowering income tax rate could result in a P139 billion revenue loss, and lowering corporate income tax rate could result in P34.8 billion revenue loss.
“Lowering income tax rates would bring down revenues by approximately P139 billion, and the lowering of the corporate income tax rates will bring down revenues by approximately P34.8 billion,” Dominguez said.
Dominguez said that to make up for the loss, the department is eyeing imposing excise taxes on oil on the back of a significant drop in oil prices, and imposing taxes on sugar and fatty foods to encourage consumers to buy healthy food.
Dominguez also eyes to expand the value added tax (VAT) by lifting some exemptions, saved for the VAT exemption on food, education and medicine.
“With respect to the VAT, the proposal is to eliminate the current exemptions, except for the exceptions on food, medicine and education, and eliminate zero-rated VAT transaction,” Dominguez said.
Dominguez said the lower income tax would increase the take-home pay of the ordinary workers while broadening the revenue base to fund infrastructure and human investment.
“In order to support the administration’s infrastructure and investment for human capital, we are expected to accomplish this while bringing down oppressive tax rates,” Dominguez said.
But Lagman said an increased take-home pay would be eroded by additional taxes on products and services.
“I’m afraid whatever benefits the decrease in personal income tax rates can be eroded by the new VAT or additional taxes consequent to the expansion of the VAT base,” Lagman said. RAM/rga