MANILA, Philippines - The House committee on ways and means has started deliberations on a bill seeking to lower the taxes to be collected from all taxpayers.
Dubbed by author Rep. Miro Quimbo as the "Tax Reform for Inclusive Growth", the bill seeks to simplify the tax structure to ensure higher tax compliance, a broader tax base, lower direct income tax revenues and have higher indirect income tax revenues and shift 11 percent of the tax burden to higher income taxpayers.
The bill seeks to impose a tax rate of zero percent for those with taxable income of less than P173,942; 9 percent for taxable income between P173,942 to P445,063; 17 percent for those with taxable income between P445,063 to P10 million and 30 percent for those with taxable income over P10 million.
It also seeks to re-bracket the current income tax bracket according to inflation.
Bracket 1 will have income earners with taxable income below P24,647, bracket 2 from P24,647 to P73,942, bracket 3 from P73,942 to P172,532, bracket 4 from P172,532 to P345,063, bracket 5 from P345,063 to P616,184, bracket 6 from P616,184 to P1,232,369 and bracket 7 for over P1,232,369.
In a presentation, Quimbo said the proposed new bracketing will see a teacher, who currently pays P31,446 in taxes, pay only P9,149 in taxes annually — resulting to an additional take home pay of P22,296.
Any revenue loss from the lower income taxes are expected to be offset by the increased purchasing power of the taxpayers.
Quimbo said right now any increases in income result in the taxpayers moving into another tax bracket where they end up paying more taxes. Tax brackets have not been adjusted since 1997.
Quimbo claimed that currently only 16 percent of individual income earners pay for 85 percent of total individual income tax collection.
The middle class pay for majority of income tax payments. Only 51 percent of self-employed professionals paid any direct tax while only 29 percent of self employed non professionals paid any direct tax.
However, Finance Undersecretary Jeremias Paul raised some concerns about the bill.
"How do you balance fiscal sustainability with the provision of services for the people… I do hope if Congress is really hell-bent, we hope Congress will look at candidates for offsetting, like plugging loopholes at the current VAT systems, yung exemptions ngayon… We should also consider indexing specific excise taxes which are now in the tax code," he said during the hearing.
DOF sees revenues losses of between 0.3% to 1.5% of GDP as a result of the proposed lowering of income taxes.