P77-B tax reform package unveiled, handed to Duterte gov't
May 23, 2016 | 9:50pm
According to the Department of Finance, the plan includes gradually lowering the highest personal and corporate income tax levies to 25 percent and restructuring brackets to four
File photo
MANILA, Philippines — A P77-billion tax reform package is being handed over by the Aquino administration to the next government which earlier vowed to prioritized tax amendments.
The amount corresponds to the plan's first year of implementation, which will see personal and income tax rates slashed, value-added tax increased and additional products to be charged with higher excise levy.
According to the Department of Finance, the plan includes gradually lowering the highest personal and corporate income tax levies to 25 percent and restructuring brackets to four.
Currently, rates are pegged at 32 percent for individuals and 30 percent for companies. There are also seven tax brackets.
The lowering of rates will be only be triggered by a rise of tax effort up to 16.5 percent, DOF data showed. As of the first quarter, the figure is at 13 percent.
Meanwhile, those earning P1 million a year will also be exempted from income taxes. The combined revenue losses for the two is pegged at P222 billion in the first year.
Finance director Elsa Agustin said this will be offset by an excise tax reform that will bring in P132 billion in the first 12 months.
"Our plan is to charge more products with excise tax, including diesel, at P6 per liter, and increase those which have it already to P10 from P5 on the first year," Agustin said in a phone interview.
After which, excise tax rates will be programmed to rise four percent every year.
Value-added taxes will also be raised to 14 percent from 12 percent, while additional transactions will also be covered. Cumulatively, this will chip in P162 billion in revenues.
A much-delayed rationalization of fiscal incentives is seen to contribute P5 billion in the first year.
Bureau of Internal Revenue (BIR) commissioner Kim Henares said tax reform should be aided by tax administration measures that will enable taxmen to better run after tax evaders.
"Tax administration gets difficult as you climb upwards. There are less and less room for improvement," Henares said by phone.
"This is the reason why if you would like us to collect more, hand to us the power to be able to cover bases where tax evaders are hiding. You should amend the law," she added.
She was pertaining to amendments to the bank secrecy law to allow BIR to scrutinize bank records for tax purposes. DOF included it on the reform program with no estimate how much revenues it will yield.
"That's what we have been saying all along, but they don't want to give it to us," Henares said.
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