Article I of the Tax Reform Bill: Give back to the people

“I don’t mind being taxed at a higher rate but I would like it to be given back to the people through public service and infrastructure and not corrupted by government officials.” I smiled upon hearing this from a fresh graduate when asked for her thoughts during a job interview about the proposed tax reform bill.

Indeed, everyone is aware of the tax reform bill pending in Congress. The bill was drafted to finally amend the almost two-decade-old income tax brackets set forth in the 1997 National Internal Revenue Code of the Philippines. The income tax rates are stuck at the 1997 levels. That means that an employee earning P500,000 per year and his company president who earns P20 million per year are subject to the same tax rate of 32%. How could we sleep on this? Do we have fair and equitable tax laws?

With a bill proposing to lower the individual income tax rate currently pegged at 32% to 17% and corporate income tax rate from 30% to 25%, we could probably rest well once it is finally approved. It has been several months ago when this news on said tax reform bill was announced on television and released on social media. Never has it been missed as one of the topics discussed with our clients during meetings or even petty conversations in the elevators. Everyone was excited until last month when it failed to get the nod of the President. Emotions poured and hopes of the people were shattered by the open rejection of Malacañang.

As one of the taxpayers, it is difficult to understand why Malacañang is against the tax reform. After all, having a higher net pay would enable me to spend more, right? Not to mention the many related taxes I am required to pay. I could easily rebut that the loss in the government’s collections on my income tax will be compensated with the additional value-added tax (VAT) that I have to pay when I shop, and there is also an income tax impact on the part of the seller for its earnings on the same item sold. It is time for the government to give back to the people and to give them the quality of life they deserve. After all, the taxpayers’ purchasing power will inevitably even generate higher taxable revenues as a whole.

In addition to what taxpayers like us would like to inform Malacañang -- stop worrying about the losses you will incur from lower our income taxes. Instead, start to be consistent and steadfast in guarding our taxes from being stolen by corrupt officials.

Drifting away from these sentiments, and looking into the reasons behind the draft tax bill, little can we understand the hesitation of the Malacañang. It is noted that the tax bill has been drafted in preparation for the Association of Southeast Asian Nations’ (ASEAN) economic integration this 2015. The reduced personal and corporate income tax rates will make the Philippine workforce and Corporations, doing business in the Philippines, competitive with their ASEAN neighbors.

Simply put, lower income tax rates will attract foreign investors to set up and bring in their business to the country. Thus, means more jobs for the Filipinos -- our kababayans will no longer work abroad and leave their families behind.

In the midst of the ASEAN integration and while the President remains firm in its refusal to cut tax rates, investors who are in the Philippines may be realizing that doing business in our country may be costly considering the tax perspective alone. Our fear is that these investors may withdraw and transfer their businesses in countries where taxes are lower than ours. We may later find ourselves along with other hundred applicants buying out for only one open position in a company.

With the initial statement of the President opposing the proposed tax bill last month have generated negative responses on television and social media. His reluctanc e to appr ove the bill prompted a number of Filipinos to sign the petition launched by the Tax Management Association of the Philippines urging Malacañang to reconsider its position on proposed income tax bill.

The sentiment of the Filipino tax payer is for our government to hear the plea of the lower and middle income tax payers. Not every working Filipino watches the noontime show AlDub, but the noontime show has resulted to over 39 million tweets. We hope that we can do the same with the petition to Malacañang, because it is every working Filipino who is affected with the tax reform bill.

Although there are reports that the President is reconsidering the idea of tax reform, let’s hope that he sees the full wisdom of the proposal. Let’s hope that Congress will not be influenced by some detractors. While we do understand that Congress has dedicated its remaining regular sessions for the 2016 national budget, we hope and pray that they will not end 2015 without urging the President to immediately pass the bill. So long as our workers are one of the pillars of our economy, one cannot disagree to the appeal of easing their tax burdens.

Marie Fe F. Dangiwan

Let’s Talk Tax

P&A Grant Thornton

The dilemma of Philippine tax reform

The call for tax reform is ever growing in the Philippines, out of fear we are being left behind by our neighbors in Southeast Asia, coupled with concerns that our people are at the mercy of the current tax system.

Our legislators have put forward revenue bills to finally amend the almost two decade-old income tax brackets set forth in the 1997 National Internal Revenue Code of the Philippines. Unfortunately a few days ago, the House of Representatives shelved the bill proposing the reforms.

The House Committee on Ways and Means said that it was influenced by the President’s unwillingness to endorse the bill. In view of the incoming recess of Congress, the House finally decided that the remaining days of their regular session will be dedicated to finishing deliberations for the 2016 national budget. This undeniably will delay, or worse, mark the end of income tax reform under the present administration.

Under the 1987 Constitution, all revenue bills must originate exclusively in the House of Representatives, but the Senate may propose or concur with amendments. Although it seems that the Senate of the Philippines is supportive of tax reform, it cannot however make a more definitive move unless the House gets its own version of the bill approved. Having seen that the House no longer deems the time sufficient to discuss the income tax reform, the Senate and the public turned out to be waiting in vain.

What then is the role of the President in all these? Why has his disapproval seem controlling in deciding the fate of the revenue bill? It must be noted that all bills passed by Congress, before it becomes a law, shall be presented to the President. If he disapproves the bill on lowered income tax, he will simply veto it and return the same with his objections to the House. Thus, another round of deliberations ensues. Not to mention that Senate shall likewise pass upon the reconsideration of the President’s objections. Imagine just how much time and efforts will be wasted if the President will just veto the bill. Who knows, the bill might not even survive the reconsideration of Congress after the President vetoes. 

The Administration fears that lowering income tax will negatively affect the budget. I believe that the issue lies not in the amount of tax collection. Rather, it is the efficient management of funds collected. Full realization every peso’s value is a must, and blocking tax reform must not be the government’s safety net.

In addition, the taxes foregone are estimated at P30 billion, relative to a P3-trillion budget. Such an amount will not really have a noticeable impact, should the government manage the impact of the tax reform properly.

Tax professionals are appealing to the chief executive to change his mind and support the lowering of Philippine income tax. Recently, the Tax Management Association of the Philippines launched a petition urging the president to reconsider his position on income tax reform. I certainly hope that more people come forward and support this cause. Remember, unity is strength and strength comes in numbers. Let our voices be heard and don’t let tax reform die at the hands of the present administration.

Could this be the end of tax reform under the current President or will our voices be loud enough to make him reconsider?

Lorraine G. Taguiam

Let’s Talk Tax

P&A Grant Thornton