Belmonte seeks middle ground on income tax cut

MANILA, Philippines - Congressional leaders are trying to set an appointment with President Aquino to try to convince him to reconsider his position against a bill seeking to reduce individual income taxes.

Speaker Feliciano Belmonte Jr. said he and Senate President Franklin Drilon have been trying to arrange a meeting with the President but there is no word yet from Malacañang.

“We’re hoping that we can have some kind of a middle ground that what we’ll pass here (House of Representatives) is something that the Senate will approve and Malacañang too,” Belmonte told reporters.

The House leader earlier said lawmakers fully understand Aquino’s opposition to the bill but that Congress can act on its own in approving the measure.

He said there’s a good chance the bill, which seeks to adjust the 1997 individual income tax system to inflation, would be passed as the measure enjoys wide support from Congress and from individual taxpayers, who are reeling from the high cost of living.

The measure, which is set to be reported out in the plenary by the House committee on ways and means, seeks to adjust individual income taxation tiers that have remained unchanged since 1997 despite inflation.

Under the bill, those earning P180,000 and below a year would be exempt from paying taxes, while those who earn from P180,000 to P500,000 would pay nine percent.

Individuals whose yearly income is from P500,000 to P10 million would pay 17 percent, while those with more than P10 million annual income will have to pay 30 percent.

At present, those earning P500,000 and above are treated the same as those in the lower income brackets and are taxed at 32 percent.

Marikina City Rep. Romero Quimbo, chairman of the panel, said the measure did not even touch the actual rates but simply adjusted the figures to inflation.

He said lawmakers are also fully aware of the proposal’s implications on government revenues, hence their passage of revenue-generating measures.

He said the Senate and the House have ratified the Tax Incentive Management and Transparency Act, which is expected to generate at least P20 billion, according to the Department of Finance.

The amount represents two-thirds of the feared P30-billion revenue loss arising from the lowering of income tax.

He said conservative estimates from government economists showed that the lowering of individual taxes based on the bill would immediately generate P4 billion from value-added tax owing to increased spending.

Valenzuela City Rep. Sherwin Gatchalian, one of the staunch backers of the measure, said the bill should not be a casualty of politics as the House is led by pro-administration lawmakers who appear to be afraid of angering Aquino.

He said he found it bewildering that while Malacañang was fretting over the P30 billion in projected revenue losses, the Aquino administration was estimated to have underspent about P400 billion for this year alone.

He said it has been widely recognized and admitted by Malacañang that the government has been underspending since 2010, which largely contributed to the slowdown in growth.

“I’m sure the administration cannot spend the P3.002 trillion it is asking Congress for next year’s budget,” Gatchalian said.

Pasig City Rep. Roman Romulo, one of the authors of the bill, said the measure was long overdue because of inflation.

Appeal to Congress

With Aquino appearing to be firmly against income tax cut, officers of the Tax Management Association of the Philippines (TMAP) made a last-minute appeal to Congress yesterday to adjust income tax rates at least for inflation.

“We have watered down our proposal from reducing the rates to adjusting them for inflation because they have not been adjusted for the last 20 years,” TMAP president Randy Bello told reporters.

He and his predecessor Christina Manuel held a news conference after submitting their latest proposal to leaders of the House of Representatives.

Bello said TMAP has supported moves in the House and the Senate to reduce income tax rates from a maximum of 32 percent to 25-30 percent and the reduction of the income brackets from seven to five.

However, he said since such proposals call for radical tax reform and because of the strong opposition of Aquino to such measures, TMAP has come up with a minimum recommendation to tweak the rates for inflation.

“This should be acceptable to the President and the Department of Finance since we are just proposing for them to take into account inflation, which has been eroding workers’ earnings, and then for them to adjust the rates,” he said.

Manuel said tweaking the rates for inflation would mean that a worker would pay the same amount of income tax he paid 20 years ago.

The same worker who paid 10 percent then is now paying 20 percent, she said.

She urged Congress to approve the minimum adjustment during its current session and under the administration of President Aquino.

“We cannot wait for the President’s successor. It would take the new administration two years to three years to approve a law on tax reform. By that time, the rates would have again been eroded by inflation,” she said.

Under the TMAP proposal, Bello said the lowest taxable income in the current seven-tier tax brackets would go up from P10,000 to P22,000 with the rate being kept at five percent, while earnings ranging from P500,000 to P1.095 million would be taxed at 25 percent.

Beyond P1.095 million, the tax would be 32 percent. Under the present law, incomes amounting to P500,000 and higher are taxed at 32 percent.

Bello and Manuel said their proposal would provide a big relief for workers.

Responding to questions, they said they were not in a position to estimate the revenue loss their proposal would cause.

“We do not have access to BIR (Bureau of Internal Revenue) data,” Bello said.

He said they have launched an online protest against the reluctance of the government to reduce income tax rates.

“Maybe, we should enlist the support of the Aldub nation,” he said, referring to a popular segment in a noontime television show.

Reached for comment, Rep. Quimbo said they would consider the TMAP proposal.

Aquino has called for a “comprehensive approach” to tax reform, telling lawmakers that if they decide to take away some revenues, they should equip the government with the means to recover the same so the economy and eventually the public would not suffer.

Election issue

Meanwhile, an alliance of government employees said its members would vote only for local and national candidates who would support the passage of pending tax cut measures.

Ferdinand Gaite, Confederation for Unity, Recognition and Advancement of Government Employees (COURAGE) president, said legislators should grant the demand of both government and private employees for the immediate passage of bills seeking to lower individual income taxes.

Members of COURAGE staged a picket outside the House of Representatives to press for the passage of tax cut measures.

“We know how great the pressure is considering it’s the President himself who has been very vocal against lowering income taxes, but the measures would definitely provide immediate relief for both government and private workers,” Gaite said.

He said taxes have been taking much of the state workers’ take-home pay with an average of 30 to 32 percent in deductions.

“The government is talking of supposed foregone revenues in case the measure is passed. But has there been any time when they talked about the many tax breaks and incentives they have provided to big businesses, both local and foreign?”

“While lowering taxes does not replace our demands for wage increases, especially the P16,000 monthly National Minimum Wage, lower taxes is important to us because this means higher purchasing power and thus immediate relief from our dire situation,” Gaite explained.

A big portion of state employees’ salaries, Gaite said, goes to taxes, which are automatically withheld.

Gaite said the recent flip-flopping of some government officials on the tax issue shows how important the issue has become.

“It’s about time that Congress exercises its supposed independence and power. We call on you to look beyond party affiliations and come election time, the people will remember,” Gaite stressed. – Jess Diaz, Mayen Jaymalin