House not backing down on income tax reform

MANILA, Philippines – The House of Representatives would continue to push the passage of the income tax reform bill, which is seen to boost the purchasing and saving power of ordinary workers, despite opposition from Malacañang, Speaker Feliciano Belmonte Jr. said yesterday.

Belmonte pointed out that the authors of the bill, which seeks to revise the personal and corporate income tax brackets, are aware of its fiscal implications and have in mind “compensatory measures” that would recover revenue losses due to lower income tax rates.

“We’re not really changing anything. We’re just giving the applicable value of things when the tax code was approved (in 1997). In other words, inflation is the problem – it’s eating up income and revenues,” Belmonte told dzBB.

Sen. Juan Edgardo Angara, working on a similar proposal in the Senate, also urged President Aquino and his finance team to take a stand on the welfare of fixed-income workers whose sector helps prop up the economy.

“Huwag naman natin silang patayin sa pagbubuwis (Let us not kill them with taxes),” he said.

Angara, chairman of the Senate ways and means committee, added the Senate could work with the House to come up with a modified tax reduction scheme as he recommends adjusting tax brackets for salaries to address the impact of inflation on fixed-income workers.

Belmonte chided the Department of Finance (DOF) and the Bureau of Internal Revenue (BIR) for rejecting outright the reform measure before actually listening to lawmakers.

“Maybe they should give their own version instead of just giving us the thumbs down,” he said in a text message.

Malacañang on Saturday said it is strongly opposing measures to lower income tax rates as this would lower government revenues. The DOF and the BIR earlier said it would agree to lower income tax rates as long as the value-added tax (VAT) is increased from 12 percent to 14 percent but the two agencies later backtracked and batted for a “status quo.”

Marikina City Rep. Romero Quimbo, chairman of the House ways and means committee, says lawmakers cannot be contented with a status quo “because that means no change for our overburdened workers.”

He lamented that Malacañang ignored calls from lawmakers for the convening of the Legislative-Executive Development Advisory Council (LEDAC) or, at least, calling a simple dialog to resolve differences, saying “we really need to sit down and see what the points of agreement and disagreements are.”

Quimbo said there was a clear disconnect in the country having one of the highest income tax rates in Southeast Asia but with the lowest collection efficiency.

The Palace, he added, should see that the projected losses from lowering personal income taxes would just be around P30 billion, a dismal amount when compared to the government’s estimated underspending of P500 billion for this year alone. Many lawmakers see this as among the real causes of the slowdown in the country’s economic growth.

Valenzuela City Rep. Sherwin Gatchalian said the Aquino administration should not have a knee-jerk reaction to the tax cut and, instead, be creative in finding ways to generate revenues other than simply taxing salary-earners.

“He (Finance Secretary Cesar Purisima) should plead his case before Congress and not with the media and show us his data to support his claim,” Isabela Rep. Rodito Albano III said.

Quezon City Rep. Alfred Vargas believes that a compromise can be made between Malacañang and the House as he said, “we just have to talk, compare notes, and triple check our figures.”

Leyte Rep. Ferdinand Martin Romualdez, leader of the independent bloc, said the government should act on smuggling, which if curbed can generate at least P100 billion annually, or P70 billion higher than the projected P30-billion loss from lower income taxes.

“Smuggling kills our economy, and that’s where the administration should focus its attention. (The administration should) not neglect our workers who are virtually being killed by the high cost of living,” Romualdez said.

Rep. Winston Castelo of Quezon City agreed, saying revenue losses “will only be minimal and can easily be recovered by being aggressive against tax cheats and smugglers.”

“Our workers are one of the pillars of our economy, it’s time for the government to give back to them. After all, the purchasing and saving power will inevitably generate even higher revenues,” Castelo said.

Advocacy

After the Department of Finance (DOF) rejected his proposal to lower income tax rates to 25 percent, Angara said he will continue pushing the measure.

“I am not giving up on this advocacy. We will suggest other measures to look into our tax reform agenda,” he said over dzBB radio.

Angara stressed that the rates have not been adjusted to cope with inflation since 1997, with the lowest tax rate at five percent while 32 percent is imposed on fixed-income earners whose salaries are more than P500,000 per year.

About three to four million middle-income workers will be affected by the proposal to reduce the income brackets for that category, he said.

Angara agreed with Quimbo, his counterpart at the House of Representatives, that those receiving fixed-income salaries are 100 percent tax-compliant compared to large taxpayers and professionals.

The Senate committee is ready to pass the tax reform measure, he said, but is still waiting for the approval of a counterpart measure at the House, where tax-related laws must originate.

Angara joined Sen. Ralph Recto in the successful move to exempt tax for the mandatory 13th month pay starting December this year.

Sin tax revenues can offset loses

Angara noted that the Sin Tax Law already increased government revenue collection by 14 percent, thus the revenue loss from reducing tax rates can be offset by taxes collected from alcoholic drinks and cigarettes.

The best the administration can do is help the middle-class workers have some tax relief to boost household spending, he said.–With Christina Mendez