Aquino favors lower income tax rates

President Aquino is amenable to reducing income tax rates but not to the idea of increasing or expanding the coverage of the value-added tax (VAT), according to government officials who attended a high-level meeting with Aquino last Monday to discuss the proposed comprehensive tax reform package.

The President had met with his economic managers and Revenue Commissioner Kim Henares to discuss the proposal from the Department of Finance (DOF) aimed at easing the burden of income taxpayers while also imposing new or higher taxes on consumption.

The proposal included policy measures that will entail legislation as well as tax administration improvements, which the DOF has claimed would lead to a “competitive, equitable and progressive” tax regime.

The package proposed to raise the tax-exempt cap on incomes of individuals and small businesses, while also reducing to about 25 percent the corporate income tax ceiling from the present 30 percent.

But the easing of income taxes is to be compensated for by either increasing the VAT rate to 14-15 percent, from the current 12 percent or further expanding VAT coverage, as well as increasing the excise tax levied on oil products.

Also part of the package is the granting of autonomy to the Bureau of Internal Revenue and the Bureau of Customs from the Salary Standardization Law (SSL), so the two revenue-collecting agencies will be able to base the length of tenure and salaries of their employees on their performance.

The President, however, did not like the idea of raising the VAT rate, according to DOF sources and Marikina Rep. Miro Quimbo.

While he was not part of the Monday meeting, Quimbo said he was informed of what transpired there.

“From what I gathered, while the President was clearly supportive of overhauling income taxes for individuals, he was vehemently opposed to shifting the burden to the poor by increasing VAT,” he said.

He said he was “not surprised” at the President’s opposition to a VAT hike, noting that “any new tax would increase the people’s burden, like an increase in VAT to 15 percent.”

Quimbo said it does not make sense to ease the huge tax burden of the middle class and then shift whatever the shortfall in revenue collection to the poorer classes through the increased VAT.–Ben O. de Vera