SNITS dropped in Senate version of tax relief bill

MANILA, Philippines - The Senate is moving to pass its own version of a tax relief bill for workers, moving closer to a clash with the House of Representatives over how to minimize the impact on the government. Senator Francis Joseph G. Escudero, ways and means committee chairman, said his panel Monday approved Senate Bill 2293 which seeks to amend the National Internal Revenue Code of 1997. Twelve senators have so far signed the committee report and Mr. Escudero said he would now be sponsoring the measure for plenary deliberations. "We hope to pass it this week [although] it’s difficult to commit. We’re working on a timetable to pass it within the week." House Bill 3971, passed on third and final reading last week, was adopted by the Senate ways and means committee sans the Simplified Net Income Taxation scheme (SNITS) that is backed by the Finance department. In its place, Mr. Escudero said the Senate measure would use the Optional Standard Deduction (OSD) scheme for both professionals and corporations. SNITS directs individuals engaged in trade, business and the practice of a profession — lawyers, doctors, dentists, certified public accountants, architects, artists and athletes, etc. — to itemize a standard 40% deduction from their gross income. OSD also provides for deductions not exceeding 40% for both individuals and corporations, but drops the need to itemize expenses. The Finance department has insisted on stricter limits for allowable deductions, saying professionals were using loopholes evade paying the proper taxes. Mr. Escudero said Senate computations show a net of P780 million for the government if the OSD is passed. The House claims a P1 billion revenue gain from the SNITS. "It’s about efficiency, not the imposition of new taxes, which we promised we would never do," Mr. Escudero said. Antique Rep. Exequiel B. Javier, chairman of the House ways and means committee, said the Senate should expect the OSD provision to be contested at the bicam level. "We will not allow that kind of version wherein the major provision that is expected to mitigate the losses of the government from the increased tax exemption of the individual taxpayers was deleted," he said. Suspending the limit on allowable deductions, he said, would result in a watered-down bill. "Limiting the allowable tax deduction is the essence of the bill. Our current problem in taxing the self-employed and professionals will not be solved," he said. Adding corporations to the mix, he said, would result in bigger foregone revenues for the government. "The 40% optional deductions is a privilege that should not be given to corporations. We will block this new provision of the Senate. The P1B expected revenue gain from incorporating the SNITS provision in the bill will be preempted by this provision and by suspending the limited allowable deductions," he said. Finance department director Ma. Lourdes Recente declined to comment extensively, but said "if it is true that they suspended the limit in the allowable tax deduction, we will oppose the Senate version." The Senate and House bills are similar in that the tax exemption was raised to P50,000 for all individual taxpayers. The current exemption is P20,000 for single workers, P25,000 for a family head, and P32,000 for married individuals. Th exemption for up to four dependents was raised to P25,000 for each dependent, from P8,000 previously. - BusinessWorld