DOF bucks bid to raise tax exemptions

MANILA, Philippines - The Department of Finance said the government stands to lose as much as P61.7 billion in revenues if Congress approves measures seeking to raise the tax exemption ceiling on the 13-month bonus and other benefits of public and private sector workers.

Different bills were filed in the House of Representatives seeking to increase the tax exemption cap from the current P30,000 to a range of P40,000 to P75,000.

The Finance Department, which oversees the Bureau of Internal Revenue, has thumbed down the proposals because of the potential revenue losses of up to P61.7 billion.

Finance Secretary Cesar Purisima said the proposals would jeopardize the government’s liability management program and public spending on social services.

The proposed bills will greatly affect the Aquino administration’s bid to improve tax to GDP (gross domestic product) ratio to 16 percent by 2016.

 â€œThe Philippines is still on deficit spending. The passage of these proposals will derail our deficit spending program of two percent of GDP in 2016, in the process wipe out the revenue gains from sin taxes that the country worked for 16 years to pass, and jeopardize our social spending commitments, especially for the rehabilitation for calamity-stricken areas and infrastructure,” Purisima said.

Purisima pointed out that taxpayers would ultimately come out on the losing end with the government grappling with meager financial resources to fund basic social services.

 â€œFor example, foregone revenues of P61.7 billion could almost fully-fund the expansion of the Pantawid Pamilyang Pilipino Program to P62.6 billion, which provides direct immediate support to poor households with irregular income,” he said.

“If the legislative proposals are passed, and additional revenue measures would take another decade to pass, then the country is in danger of going back into the vicious cycle of fiscal mismanagement. Historically, countervailing revenue measures have been much harder to pass in Congress since increasing taxes is not popular. But the DOF was not made to be popular; it was made to be responsible for the country’s economic health,” Purisima added.

The DOF chief also pointed out that taxpayers have already benefited from previous reforms that  increased their personal and additional exemptions by up to 456 percent, much higher than the 157 percent adjusted value for inflation since 1994.

Purisima also noted that the Finance Department has always advocated for responsible revenue-neutral policy making, which urges lawmakers to identify fund sources for revenue eroding proposals.

“Ultimately, our stance is beneficial to our taxpayers since a fiscally capable and responsible government will be more equipped to carry out economic reforms that spur inclusive development. Instead, we must strengthen the country’s socio-economic conditions through expenditure programs which benefit everyone, including salaried taxpayers,” Purisima said.

Some lawmakers, however, said the DOF or BIR should look for other ways to generate revenue instead of imposing the burden to wage earners.

Legislators said  any decline in collections could be offset by the expected increased spending power of salaried workers.