MORE than four million Filipinos classified as low-income earners will be exempted from paying income tax under the Department of Finance’s proposed new income tax system, Finance Undersecretary Karl Kendrick Chua said during a forum hosted by the Senate Tax Study and Research Office (STSRO) in the Senate.
Chua said that around 4.6 million taxpayers with income of P250,000 and below will not be subjected to income taxes if the new income tax system will be passed into law.
“A simpler, fairer, and more efficient tax system can promote investment, job creation and poverty reduction. It will also fund government projects in infrastructure, education, health and social protection,” he said.
Chua said that the proposed income tax system comes in light of the high level of support the Duterte administration has committed for comprehensive tax reforms – which have often encountered complications in previous administrations.
“The proposed tax policy reform program which aims to lower the tax rates and increase the base of taxpayers is included in President Rodrigo Duterte’s 10-point socioeconomic agenda,” he said.
Sen. Juan Edgardo “Sonny” Angara, who attended the event, said he strongly supports the proposed tax reforms, noting that “the last ambitious tax reform program was undertaken several governments, several administrations ago.”
Angara, chairman of the Senate Committee on Ways and Means, said the government would have to study carefully how these changes to the country’s taxation system would affect the nation’s economy and various socio-economic sectors in the long run.
“We have to consider the effects on various industries, we have to consider the effects on the job creation program of the government, we have to consider the effects on the little people, the regular people – the people who don’t pay their income tax at present but pay consumption taxes and those who will be affected very much by the new proposals,” he said.
According to Chua, the DoF’s proposals will update the country’s two-decade old income tax system used in determining the taxes imposed on the public, by raising the figures to amounts reflective of modern economic realities and inflation rates.
For the first year of implementation, those with annual income of less than P250,000 will have no income tax while those whose annual income is between P250,000 and P400,000 will pay 20 percent tax rate on the excess over P250,000.
Workers with annual income between P400,000 and P800,000 will pay P30,000 + 25 percent on the excess over P400,000.
Aside from the reforms in the income tax rates, Chua said the DoF would also look into lowering the corporate income tax to 25 percent, and as well as reducing property taxes and capital income taxes.
However, he said the proposed tax policy package would also implement new taxes on sweetened beverages and higher excise taxes on alcohol and tobacco, as well as new taxes on fatty foods, jewelry, mining, carbon, gambling, lottery and casinos.
Chua said personal income tax of the self-employed and professionals should also be looked into as 40 percent of income came from this sector but only 20 percent of income taxes were attributed to them.
He further said that other reforms in the country’s taxation policies are needed, noting that current tax exemptions and strict bank secrecy laws resulted in high tax rates with only half of the economy being taxed.