TMAP urges tax exemption for individuals earning not more than P300,000/yr

MANILA, Philippines - The Tax Management Association of the Philippines (TMAP) has proposed the  exemption of  individuals earning not more than P300,000 a year  from paying income tax as part of a package of reforms it plans to submit to Congress to sort out the country’s outdated and inequitable taxation system.

In a briefing yesterday, TMAP president Rina Manuel said the P300,000 tax exempt threshold would adequately cover the current exemption of minimum wage earners and proposed exemptions for marginal income earners.

Under TMAP’s proposal, the lowest tax rate is adjusted from five percent to 10 percent for income of more than P300,000 but not over P500,000.  This is equivalent to P20,000.

For those earning more than P500,000 but not over P1 million,  the taxable income proposed by TMAP is P130,000 or 20 percent of total income.

A 25-percent tax rate, on the other hand, would be imposed on individuals with gross earnings of more than P1 million but not over P2.5 million.

TMAP, the premiere professional tax organization in the country, has proposed to reduce the maximum tax rate to 30 percent from the existing 35 percent. This covers all earnings exceeding P2.5 million.

Sen. Paolo Benigno “Bam” Aquino IV said now is the right time to adjust individual income tax rates and brackets, noting that the  existing rates remained unchanged since 1996.

Aquino filed two bills seeking to effectively reduce individual income taxes to allow Filipinos to enjoy a higher net income and increase  their purchasing power.

He is hopeful that measures seeking to rationalize the country’s income tax rates for individuals would get passed.

Finance Secretary Cesar Purisima said the agency is open to reviewing the tax system with the aim of making it more friendly to investors and protecting the interests of both the government and Filipino people.

Purisima said the tax   system serves an important role in funding quality public services that benefit individual members of the community as well as the economy in general.

 The country needs a tax system that is oriented to supporting strong and sustainable economic growth, he added.

Purisima said the passage of  bills seeking to lower income taxes would result to revenue losses for the government and should therefore be accompanied by new revenue-generating measures.

Sen. Aquino said the country needs to alter its tax  rates to make the Philippines more attractive to foreign investors especially with the expected integration of the 10 member-states of the Association of Southeast Asian Nations in 2015.

The Department of Trade and Industry is reviewing the tax rates imposed by other countries in region to determine whether there is a need to match them or impose better rates to lure more investments into the Philippines.