Purisima supports lowering of taxes

CEBU, Philippines - “I want lower taxes.”

Finance Secretary Cesar Purisima said affirming his support to the plan to lower the individual and corporate taxes in the country, which are said to be the highest in the ASEAN region.

Purisima in fact revealed that he has personally finalized a proposal asking the Congress to look into lowering taxes. He, however, stressed the need to improve the government’s ability in collecting tax revenues.

The Department of Finance recently announced it is open to consider the call of the taxpayers to cut income tax rates.

“I sympathize with the fixed-income earners. I believe that as ASEAN integrates, we have to have a competitive tax structure. We have to change the whole system,” the secretary said during the annual national convention of the Philippine Institute of Certified Public Accountants in Cebu this week.

Purisima pointed out the finance agency is ready to execute reforms in the country's tax system to make it competitive.

The finance chief also said reduced tax rates in the country are definitely possible if only the government could combat tax evasion and under-reporting of income.

Holistic solution

The DOF wants to come up with a holistic solution for an effective tax system and remove the rules and laws that prevent better revenue collection, he noted.

He particularly cited the Bank Secrecy Law which, he said, needs to be lifted to enhance transparency and fight tax evasion.

Such law allows banks and other financial institutions to keep confidential information of their clients from the government specifically tax authorities.

Cebu Bankers Club president Gino Gonzalez already said if banks disclose personal details of investors in the financial sector, clients may sue financial firms for violating the Data Privacy Act.

Resources

“One of the important functions of our nation is to generate resources. Without resources, there can be no nation, no services, no security, no infrastructures and no society,” he said.

He added: "We need to invest in our nation. One way to do that is pay the right amount of taxes."

While the country has the highest tax rates in the ASEAN, it ironically is among those nations that have low tax-to-GDP ratio in the region.

The tax-to-GDP ratio computes the total government tax collection divided by the nation’s national gross domestic product. If tax revenues increase at a slower pace than the nation’s GDP, the said ratio declines.

In the first of this year, the Philippines’ tax effort jumped to 13.7 percent of its total economic output due to improving collection of the nation’s budget revenue.

'Good for taxpayers'

For his part, Ipher Tabañag, president of PICPA Cebu Chapter, said the plan for income tax reduction is always a welcome idea for taxpayers.

“If that is the policy direction of the secretary (Purisima), we will go for it,” the official reacted at the sidelines of the convention.

“If taxes are reduced, people will be happy. Taxes are considered burden for the people,” said Tabañag, who also sits as Assessment Section chief of Bureau of Internal Revenue in Cebu.

He indicated the DOF has been studying on these tax matters, noting tax system amendment is a continuous process.

The government likewise warned it may lose as much as P60 billion in potential revenues if the proposed measure that imposes higher tax exemption cap of 13th month pay and other bonuses is approved.

The Senate recently approved on second reading the bill that seeks to increase the tax exemption cap from the current P30,000 to P82,000 -- from the original P75,000.

The PICPA official explained the tax reducing measures pending in Congress are not all that bad as they also ensure that salaried workers will have higher take-home pay.

Thus, increasing their purchasing power that offsets the projected revenue loss through value-added tax imposed on goods and services they buy.

In a previous interview, corporate tax expert Lawyer Jonathan Capanas stressed the government should realize that lower individual and corporate tax rates entice more local and foreign investments.

“If we lower our tax rates, more investments will come in. So, it will create more economic activities, it will generate more revenues ug daghan na mga newly-created businesses. So, mao ni mo-offset sa revenue losses due to the adjustment of the tax rate,” he told The FREEMAN.

He said the nation's taxation is highly unequal and outdated.

BIR Cebu officials insisted reducing tax rates would impact the bureau's revenue collection which could hurt government spending, a vital factor in economic growth. (FREEMAN)