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Why Angara is pushing for lower income taxrates

by Jon Carlos Rodriguez, ABS-CBNnews.com

Posted at 03/18/2014 3:09 PM | Updated as of 03/18/2014 3:09 PM

MANILA, Philippines Senator Sonny Angara on Tuesday said he is pushing to lower income

tax rates to help the country become more competitive compared to its ASEAN neighbors.

Among ASEAN countries, the Philippines currently ranks third highest in individual income tax

rate at 32%.

Thailand has the highest tax rate in the region at 37%, but the country is also trying to lower it to

35%.

Vietnam is second with 35%, also down from 40% in 2013.

Under Senate Bill 2149, Angara is looking at a 3-year adjustment period, with individual income

tax rates cut down from 32% to 28% in 2016 then to 25% in 2017.

He added that tax brackets will also be adjusted to take out the P10,000 base and increase it to

P20,000-P70,000.

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Under the current system, those earning P10,000 a year are taxed 5%. Angara is proposing to

increase the lowest tax base to P20,000-P70,000, and tax that bracket 15% in 2015; 13% in

2016; and 10% in 2017.

We dont just adjust the rates, the percentage thats taken from your income, you also adjust

the thresholds because yun ang importante. But what our constitution says is that you must

have a progressive system of taxation, meaning if youre richer, you have the capacity to pay

more. If you earn just a little, the government wont take as much from you, he told ANC.

Angara, who is the chairman of the Senate Ways & Means Committee, said the countrys tax

system is outdated and no longer applies to the current cost of living.

We studied the tax system and medyo luma na siya. In fact, our tax rates date back not only to

1997, it dates back to 1977, during the time of President Marcos, he said.

The lawmaker also believes that lowering income tax rates will increase purchasing power and

improve compliance.

We are hoping that this will induce voluntary compliance. There are studies that have shown

that as you lower the tax rates, compliance tends to get better. But the assumption there is that

you have a credible tax collector and in BIR [Bureau of Internal Revenue] Commissioner Kim

Henares, natatakot ang tao, and the belief also is ginagastos naman ng Aquino administration

in the right way. So for me, its the right time, he said.

He noted that his bill is still open to negotiations and suggestions from the BIR and the

Department of Finance (DOF).

The DOF earlier said the government could lose as much as P43 billion in taxes by 2017 from

Angara's proposal.

Henares, meanwhile, said the BIR is open to studying the proposal but the agency still has to

address other loopholes in the tax system.

Malacanang has refused to comment on the proposal, said they are leaving the decision to the

BIR and the DOF.

Senators Ralph Recto and Bam Aquino also have filed bills seeking to adjust tax brackets.

Angara believes these bills will not receive much opposition from other government agencies.

Wala siguro kasi apektado din sila eh. I think theyll also be happy in paying with more money

in their pockets to spend for their families, he said.

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