Lawmakers, finance officials clash over push for lower income tax, says Belmonte

Speaker Feliciano Belmonte Jr.
INQUIRER PHOTO/LYN RILLON

Speaker Feliciano Belmonte Jr. on Tuesday spilled details of the Congress leaders’ clash in opinion with finance officials during a last-ditch effort to push for lower income tax.

In a press conference, Belmonte said the difference in opinion was apparent in Monday night’s meeting with President Benigno Aquino III, Finance Secretary Cesar Purisima, and revenue chief Kim Henares over the proposed measure in the legislature to lower the income tax rate.

The bid to lower income tax rate was initially opposed by President Aquino for fears that it might result in revenue loss and it might dampen credit ratings. He also said the benefits of lower income tax might be offset by an increase in value added tax which might be imposed to offset losses in tax. Aquino later eased his position upon further study by finance officials.

Belmonte said Congress is pushing for lower income tax rate by adjusting the tax brackets on the present inflation levels.

The present income tax brackets have been pegged at 1997 inflation levels.

Belmonte said he and Senate President Franklin Drilon gave a “vigorous presentation” in pushing for tax bracket adjustment, but Purisima supposedly recommended not to look at the measure as a “piecemeal” legislation and instead look at evaluating the entire tax scheme.

“In brief, we made our pitch for it, we made a vigorous presentation. In some cases, kinontra ng kaunti ni Purisima, saying we should not be doing a piecemeal thing. We should address the whole issue of income tax scheme and so forth,” Belmonte said.

Belmonte said he could not understand Henares and Purisima’s insistence to also look into amending the bank secrecy law, which they said failed to clamp down on bigtime tax evaders.

Purisima has said the bank secrecy restrictions should be lifted for suspected tax evaders.

“Hindi ko lang maintindihan yung notion na kailangang ire-examine ang bank secrecy law. Hindi ko malaman anong connection nun. That was one of the arguments advanced yesterday, that we should give the Bureau of Internal Revenue (BIR) the wherewithal to run after big tax payers,” Belmonte said.

Belmonte said he also hit the BIR for going after fixed income earners and not the rich taxpayers to plug in the tax revenue hole, adding that there is much more to be done in improving the country’s tax effort.

“Biira ko naman sila. Tinutugis nila yung mga fixed income people whose income are subject to automatic deduction. Bakit hindi niyo tugisin ang mga super yaman? According to Henares, they’re doing that. But the fact of the matter is, our tax effort leaves much to be desired,” Belmonte said.

Belmonte said he and Drilon were “vehement” in their position to push for tax brackets adjustment.

“Their claim is that the entire tax code should be looked up. Kami naman, let’s start with updating it. The values of the brackets are based on 1997 values, whereas nagbago na ito after 17 years,” Belmonte said.

“Mahaba din ang discussion namin because Frank (Drilon) and I were very vehement. After listening to all four of us, sabi ni Presidente, ‘You’ve made your point,’ so they went on their own conversations,” Belmonte said.

The income tax reform bill pending in both chambers of Congress seeks to raise the tax exemption ceiling to P150,000 a year and lower the income tax rate currently pegged at 32 percent.

The bill would also raise from P500,000 to P10 million the trigger for the higher income tax rate and reduce the corporate tax rate from 32 percent to 25 percent.

Congress resorted in shifting its move to adjust bracket levels after the Tax Management Association of the Philippines (TMAP) urged House leaders to adjust levels of taxable income to inflation.

The TMAP has called for the passage of an income tax bill which provides for the indexing of tax brackets to inflation and a mechanism for its automatic indexation.

The present tax code sets a 32 percent rate for individuals with an annual taxable income of more than P500,000.

The legislature is eyeing to lower income tax rate just after President Benigno Aquino III signed the law increasing the tax exemption cap on bonuses to P82,000 from P30,000.

In pushing for income tax reform in the lower chamber, ways and means chair and Marikina Rep. Miro Quimbo had warned of a “bracket creep” phenomenon wherein workers’ salaries increase according to inflation while tax brackets remain unadjusted since 1997, when the tax code was passed.

He said at least 16 percent of total individual income earners pay for 85 percent of total individual income tax collection in 2013.

Meanwhile, 72 percent of all income taxes are paid by the middle class while the highest income earners shoulder a smaller portion of tax payments, Quimbo added. TVJ

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