MANILA, Philippines - A lawmaker is seeking to slash corporate and income tax rates by half.
Under House Bill 4099, income tax rates will be at 15% from the current 32% (individual) and 30% (corporate).
The bill's proponent, Valenzuela Rep. Magtanggol Gunigundo believes, if approved, the restructured tax system will encourage higher tax compliance.
A single employee earning P15,000/month or P180,000/annum pays P20,500 income tax under the current system. The proposed bill reduces income tax to only P9,500.
Meanwhile, a married employee with 4 dependents and earning the same salary who now pays P2,500 will only be paying P1,500.
Aside from cutting corporate income tax in half, HB 4099 will only deduct 15% from gross income of corporations. This provides for a simplified tax system that is expected to attract more investors and avoid red tape.
Gunigundo admits the government stands to lose about P90 billion with the initial implementation of the new system but the lawmaker refuses to classify this as loss. He says reduced taxes would mean more income for employees who then have more money to spend on taxable goods and services.
But BIR Commissioner Kim Henares says this is based on the assumption that all businesses pay proper taxes.
Henares is open to restructuring the income tax system and salary grades but she says there are other measures that need to be prioritized.
Cutting back P90 billion from the government's income could mean cutting back on essential projects and jacking up other taxes and the prices of goods.
Henares admits the idea of paying lower income tax sounds appealing but the bigger picture would show it brings more loss than gain.