MANILA - Bayan Muna Rep. Carlos Isagani Zarate on Thursday said the government's Comprehensive Tax Reform Package (CTRP) favors singles over married individuals, but Budget Secretary Benjamin Diokno insisted that their proposal will benefit everyone.
"It can be seen that there is a fiscal bias for single professionals while those with dependents are taxed more. Also, they made it mandatory to present the certificate of tax payment or the income tax return (ITR) for the Professional License Renewal," Zarate said in a statement.
Zarate asked his fellow lawmakers to reject the Department of Finance (DOF)-backed tax reform package when it is discussed in plenary next week.
House Bill 5636 passed the Ways and Means committee last Monday and is the topic of the all-party caucus on Wednesday.
"This bill will definitely hit the poor hard because it would mean higher prices of basic goods and services. Another adverse effect of this bill is that it will also hit the middle class hard," warned Zarate.
He noted, the bill removed the tax exemption of minimum wage earners and imposed an 8-percent tax of gross sales or gross receipts for the self-employed and professionals.
Additionally, Zarate said, self-employed and professionals above the value-added tax (VAT) threshold of P3 million would be "taxed as corporations."
Diokno insisted however that everybody wins with tax reform, though he admitted that the benefits will not be equal across the board.
"Everyone's a winner in the CTRP, but some will be bigger winners than others. The correct and logical way to look at the tax reform is to see it as part of fiscal reform -- the tax and expenditure mix," he said.
"It should be the net incidence of the package, per cohort. More than 9 of 10 income tax filers will benefit; they will have more money in their pockets. The jobless will get jobs because of the build, build, program. The car-less will benefit from better, more modern mass transit system."
Diokno added, even the rich who will be most affected when higher income taxes and higher tax on oil products and cars are imposed will benefit "in terms of better, safer, richer and more beautiful society."
"Who do you think will earn more money for contractors? Who will earn more money as new communities are developed due to greater interconnectivity? That is what is called general equilibrium analysis. Don't just look at the partial impact of higher taxes. It depends also on how the additional revenues will be used by governments," he said.
Diokno tells everyone to think of the bigger picture. "There are only a few rich in this country, but they control more than two-thirds of the economy. Sad but true. But when you craft public policy, it should be what's good for the greater majority. That's why we focus not only on headline GDP but also on reducing inequality."
The bill proposed that personal income tax rates be lowered, according to DOF's proposal, but indexed to cumulative Consumer Price Index (CPI) inflation every three years.
It also sought a flat rate of 6 percent for the estate and donor's taxes and a broader tax base by removing special laws on VAT exemptions, including those for cooperatives, housing and leasing. It retained though the exemptions for seniors and persons with disabilities.
It also proposed a staggered "3-2-1" excise tax increase for petroleum products from 2018 to 2020 but with no indexation to inflation, and liquefied petroleum gas (LPG) used as feedstock to be exempted from the hike.
Also among the highlights of the bill were: a five-bracket excise tax structure for automobiles with a two-year phase-in period for the tax increases, and earmarking of 40 percent of the proceeds from the fuel excise tax increase for social protection programs for the first three years of the tax reform measure's implementation.
The bill also adopted the DOF proposal of removing the 15 percent tax rate for the employees of foreign business who serve its affiliates, subsidiaries or branches in the Philippines and other foreign markets.
As proposed by the DOF, the tax payable by employers for benefits paid to an employee will also be initially lowered from 32 percent to 30 percent for the first three years and thereafter incorporated in the gross income of taxpayers.
Meanwhile, the original proposal of staggering the increase of oil excises to P3 in the first year, P2 in the second year and P1 in the third year was adopted, but with indicated no indexation to inflation thereafter.
For automobile excises, five brackets were adopted under the substitute bill, which also set a two-year phase-in period for its implementation, except for pick-ups and hybrid cars that can run 30 kilometers on a single charge.