Address collection issues before lowering income tax rate – BIR

Before lowering the income tax rate, lawmakers must first address the legal loopholes that impede revenue collections by the government, according to the Bureau of Internal Revenue.

 

The bureau is open to talk about reducing the income tax as long as the government can efficiently collect revenues, Kim Henares told reporters on the sidelines of the APEC meeting last week.

 

On Monday, President Benigno Aquino III thumbed down the move in Congress to lower the income tax rate from 32 percent to 25 percent, even though Malacañang said late last month that it was amenable to such a move after fiscal authorities have completed a “holistic” review of the tax structure. 

 

In his latest and seemingly final position on the matter, the President was concerned that losing revenue would jeopardize the country's investment grade credit rating from global debt-watchers.

 

Without belittling such stand, an economist noted that greater economic growth must be given more importance.

 

“Credit rating is important to investors, but what’s more important is that growth must be robust which can be achieved through higher disposable income, consumption spending on commodities, and of course, savings,” independent economic consultant John Paolo R. Rivera said in a text message on Tuesday.

 

The government stands to lose P30 billion a year once the income tax rate is reduced, on top of an estimated P150 billion to P300 billion in foregone revenues because of tax evasion by the non-fixed income earners, according to BIR estimates.

Disposable income

 

But Rivera isn't convinced that investors go only where the credit rating is good, noting that investors also look at a country’s disposable income.

 

“If I am an investor, I would invest in an economy that would have a higher demand for the products that I will produce and sell,” he said.

 

“This can only happen if consumers have a high disposable income, accompanied by a high propensity to consume,” Rivera added.

 

To address tax evasion, the BIR wants Congress to relax the Bank Secrecy Law for the purpose of looking into the accounts of suspected tax evaders. Only then should the government start computing the decrease in the tax rates, Henares said.

 

Only 400,000 of the 1.8 million self-employed in the country pay taxes, according to BIR estimates.

 

While the call for lowering the income tax is a popular stand, it has no real practical value, Malacañang said earlier this month.

 

Communications Secretary Herminio Coloma Jr. noted in a briefing that there was no way the Aquino administration will support such calls simply because it needs revenue to pay for products and services.

 

As early as September 2014, there was already a growing clamor for the leaders of Congress to pass measures that will reduce the income tax rate and ease the burden among the working class. 

 

The call prompted  Marikina Representative Romero “Miro” Quimbo, chairman of the House committee on ways and means, to reveal that the legislation of a comprehensive tax reform bill has been prioritized so that it can be passed this year. – With a report by Jon Viktor Cabuenas/VS, GMA News