MANILA, Philippines - Sen. Juan Edgardo Angara yesterday stressed the need to update and amend what he described as an outdated and inequitable tax system in the country in order to reduce the maximum tax rate from 32 to 25 percent by 2017.
Angara, chairman of the Senate ways and means committee, batted for the adjustment of tax brackets to make it more sensitive to the workers’ pay rate.
At present, a worker who receives a salary of P50,000 a month and is considered belong to the middle class, is paying the same tax rate as that of the country’s billionaires.
“In a highly unequal system like ours, it hurts the middle-income earners. Something must be done here,” said Angara, who conducted the second committee hearing on bills that seek to reduce income tax rates the other day.
Angara has filed Senate Bill No. 2149 seeking to adjust and compress income tax brackets, and reduce the maximum tax rate from the current 32 percent to 25 percent by 2017.
“Updating our tax system is an issue of equity. It’s not an issue anymore of macroeconomics. That’s all meaningless if the average person has nothing left for his family,” he said.
The senator noted that the current top tax bracket, which includes those earning over P500,000 a year, was the top tax bracket during the time of former President Ferdinand Marcos.
“Can you imagine? With P500,000 my parents told me you can buy a house and lot in the ’70s and early ’80s. At present the amount is only good to purchase a car,” he said.
Angara said the tax burden in the Philippines is heavier than that of its neighboring countries. He cited for instance a person earning P500,000 ($11,000) a year here is taxed at the maximum rate of 32 percent, while Singapore’s top tax bracket of $250,000 has a tax rate of only 20 percent.
In Indonesia, the top tax bracket of $43,000 is taxed 30 percent; Malaysia’s top tax bracket of $30,000 has 26 percent tax rate, and Thailand’s top tax bracket of $123,000 is taxed 35 percent.
“Gone is the progressive nature of our tax system and so does its element of equity and fairness,” Angara said.
If the Angara bill will be enacted, the country’s top income tax bracket would now be over a million pesos ($22,000) and will be taxed 25 percent by 2017.
Meanwhile, lawyer Lea Roque of Punongbayan and Araullo, an accounting and consulting firm, expressed support for the bill and suggested an automatic adjustment of the tax brackets and tax rates based on the consumer price index every three years without the need for legislative action.
Lawyer Malou Lim of Isla Lipana and Co. expressed support for the bill, saying that lower taxes can result in higher capital inflow and higher purchasing power.
For her part, lawyer Benedicta Du-Baladad of the Financial Executives Institute of the Philippines stressed the need to simplify the tax system for easier compliance and to improve collection.
The Department of Finance opposed the proposal.