Monday, November 16, 2015

TMAP's proposed income tax reform

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MANILA - Following President Aquino's rejection of the proposal to lower income tax rates, two leaders of the Tax Management Association of the Philippines (TMAP) offered leaders of Congress a compromise proposal with a similar intended effect.

TMAP president Terrence Conrado Bello was joined by former TMAP president Rina Manuel in submitting to Congress their proposal which updates the tax brackets for taxpayers.

Updating the tax brackets hopes to make tax rates reasonable compared to current costs of living.

This proposal is originally part of a package of reforms the group wants but considering the difficulties of passing these reforms, the group stated that the government should prioritize this reform instead above the others within this administration.

House Speaker Sonny Belmonte and Majority Leader Neptali Gonzales II, however, were both unavailable to personally meet the two TMAP leaders when they went to the House of Representatives on Wednesday.

They were instead met by Bayan Muna Rep. Neri Colmenares, who authored one of the bills seeking to lower income tax rates.

TMAP believes that updating the tax brackets for individuals will alleviate the plight of "over taxed" salaried individuals under the current system.

Their proposal will only involve amending the tax code to indicate the revised individual income tax table with a provision for its automatic indexing on a periodic basis, enabling the House and the Senate to easily enact it as soon as possible.

The following is the current tax bracket system for annual incomes:

Not over P10,000: 5 percent

Over P10,000 but not over P30,000: Fixed tax of P500 plus 10 percent of excess of P10,000

Over P30,000 but not over P70,000: Fixed tax of P2,500 plus 15 percent of excess over P30,000

Over P70,000 but not over P140,000: Fixed tax of P8,500 plus 20 percent in excess of P70,000

Over P140,000 but not over P250,000: Fixed tax of P22,500 plus 25 percent of excess over P140,000

Over P250,000 but not over P500,000: Fixed tax of P50,000 plus 30 percent of excess over P250,000

Over P500,000: Fixed tax of P125,000 plus 32 percent of excess over P500,000

The following is the proposed tax brackets adjusted to inflation or the cost of prices of goods:

Not over P22,000: 5 percent

Over P22,000 but not over P66,000: Fixed tax of P1,100 plus 10 percent of excess of P22,000

Over P66,000 but not over P153,000: Fixed tax of P5,500 plus 15 percent of excess of P66,000

Over P153,000 but not over P307,000: Fixed tax of P18,550 plus 20 percent of excess over P153,000

Over P307,000 but not over P547,000: Fixed tax of P49,350 plus 25 percent of excess over P307,000

Over P547,000 but not over P1,095,000: Fixed tax of P109,350 plus 30 percent in excess of P547,000

Over P1,095,000: Fixed tax of P273,750 plus 32 percent of excess over P1,095,000

A similar proposal for tax rebracketing is part of the pending bills in the House Committee on Ways and Means.

Colmenares said Congress can pass this bill despite Malacanang's objections because under the Constitution, the House is the one empowered to formulate tax measures.

Colmenares added that while the President can veto the bill, he feels it's better if the President is actually put in a position to veto it.

Bello, meanwhile, said their proposal is a last-ditch effort to convince House leaders to make income tax reform a priority.

Bello cited that their original advocacy was to make Congress pass a measure to update the tax brackets which were imposed about 20 years ago.

He said inflation has eaten into the purchasing power of workers and now makes it necessary for personal income tax to be reduced for the country to remain competitive.

Bello recognizes that without the President's support, there is a slim chance for income tax reform to happen. That's why they are just calling for Congress to at least update the tax brackets to alleviate the plight of salaried workers.

Manuel believes updating the tax brackets will benefit low- and middle-income salaried workers.

Manuel said their proposal also dispenses the need to further study the proposal because it merely seeks to replace the existing brackets. She believes this is a good first step to tax reform with the rest being pursued by the next administration.

Bello said their proposal does not touch any other provisions of tax laws. He cannot estimate how much revenue losses government will incur but he believes it will be definitely lower than the P30 billion that the government expects with the full package of tax reforms.

Colmenares believes government can afford to lower income taxes because based on a study by his office, Filipino taxpayers have been overtaxed by about P1.4 trillion in the last 20 years.

Manuel believes the indexation of income taxes can happen now but postponing it till the next administration may mean two more years of waiting since that's the length of time the next president will need.

Colmenares added that Malacanang has no reasonable argument against the proposal.

Bello said their group has launched a "black payday Friday" protest to call for the reform. Manuel, on the other hand, encouraged the public to join their online petition for income tax reform on the website

On Tuesday, Belmonte said he wants to make sure there is a middle ground when it comes to the proposal to lower income tax rates.

Belmonte said he asked Senate President Franklin Drilon to arrange a meeting for the purpose. Malacanang has thumbed down the proposal.

Belmonte said leaders of the House and Senate will meet later this week to thresh out their common agenda in the remaining session days.

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