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Administration should consider new taxes - Teves

- Iris Gonzales -

MANILA, Philippines - The Aquino administration should strongly consider slapping new taxes so that it could raise revenues for its projects and help cushion the economy in case another global financial crisis erupts, former Finance Secretary Margarito Teves said.

Teves, who served the Macapagal-Arroyo administration as Finance chief from 2005 to 2010, said President Aquino can capitalize on his popularity and seek the help of Congress to pass new taxes.

“We have the signs of a global crisis again. Commodity prices are up and oil prices are up. (President Aquino) has no buffer. He needs a buffer,” Teves told reporters Wednesday night.

He said that presidents do not often enjoy high popularity ratings as what Aquino is enjoying now.

Teves warned that Aquino’s popularity rating may soon decline and that it would have been too late already to act on the problem of revenues.

“Popularity ratings do not stay at the same level too long,” Teves said.

He said it would be easier for the government to ask Congress to push for new taxes rather than to ask lawmakers to reverse the revenue-eroding measures that are already in place.

Teves said that when 2013 nears, the government might not be able to get the support of Congress for new taxes because of the mid-term elections.

“We might be acting too late in raising additional revenues. Why wait for 2013 if we can do it earlier?” Teves noted.

The Aquino administration has consistently said that it would plug tax leakages first before it would consider raising new taxes.

He said the current administration can do both considering that the public believes in its good governance agenda.

Teves noted that in 2005, when Congress approved the Expanded Value Added Tax Law, the government was able to raise P80 billion from the measure.

At the same time, Teves lamented that these gains have been eroded by other measures approved in Congress that affect revenues.

He cited for instance the Minimum Wage Law which increased the personal tax exemptions of taxpayers and exempted the withholding tax on minimum wage earners.

Republic Act 9504 or the tax relief law took effect in July 2007 and has been estimated to have been responsible for P20 billion in lost revenues yearly.

The law exempted minimum wage earners from withholding tax and increased the personal exemptions of individual taxpayers.

 Specifically, the law increased the personal exemption of single taxpayers to P50,000 from P20,000; to P50,000 from P25,000 for the head of family; and to P50,000 from P32,000 for married individuals.

Likewise, the deduction of each qualified dependent not exceeding four was increased to P25,000 from P8,000.

Furthermore, the law also gave professionals, self-employed individuals, and corporations an option of deducting a uniform 40 percent from gross sales or receipts to arrive at taxable income subject to the income tax instead of the standard 10 percent under the tax code.

According to estimates made by the Department of Finance, P60 to P65 billion is lost yearly because of various revenue-eroding measures.

These measures include the lowering of the corporate income tax rate to 30 percent from 35 percent which has been translated to P15 to P20 billion in revenue losses yearly.

The National Tourism Act, meanwhile, is estimated to have translated to P3 billion in foregone revenues.

Another measure, the imposition of franchise tax on power transmission in lieu of all national and local taxes, is expected to leave a dent on state coffers amounting to P9 billion a year.

The so-called Personal Equity Retirement Account (PERA) Act of 2008, a tax-free pension scheme for retiring individuals, meanwhile, would cost the government at least P7 billion yearly.

AQUINO

BILLION

DEPARTMENT OF FINANCE

EXPANDED VALUE ADDED TAX LAW

FINANCE SECRETARY MARGARITO TEVES

MINIMUM WAGE LAW

NATIONAL TOURISM ACT

PERSONAL EQUITY RETIREMENT ACCOUNT

PRESIDENT AQUINO

TAX

TEVES

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