THE Duterte administration’s multiyear tax-hike plan could cost taxpayers P566.4 billion a year, or almost three times the P193.8 billion in revenues that the government could lose due to cuts in income and corporate taxes, according to Senate Minority Leader Ralph G. Recto.
Taking up the cudgels for overburdened taxpayers, Recto said the Duterte administration should first remove “unnecessary expenses” and cut red tape before imposing new taxes.
In a statement, Recto said President Duterte’s finance officials, for a start, could “save and simplify” government spending before imposing new tax schemes targeted to bring in “two-thirds of a trillion pesos in fresh revenues annually.”
For instance, the senator suggested that the Duterte administration “scout for frivolous and unnecessary expenses, which can be cut or totally done away with, before jacking up tax rates.”
To encourage more people to pay taxes, Recto said the government needs to “simplify, shorten and streamline” procedures in revenue offices.
“Cutting red tape is an effective tax-administration measure,” he said, adding that the Duterte administration’s tax program “must be predicated on eliminating red tape first.”
“Many taxpayers are willing to pay their dues if only revenue processes are not cumbersome and complicated,” he said.
To drive home his point, Recto cited as example the 11-pages-long income-tax return forms.
In addition, he said, “a small business has to undertake 36 tax-related transactions annually, [and] because of complicated tax rules, a small trader has to put in his payroll an employee whose sole job is to liaise with government offices full time.”
The senator suggested that “steep penalties, high fines, short compliance period and arbitrary levying of surcharges should be reviewed and tempered,” saying such impositions “prevent individuals from coming forward to comply.”
Acknowledging that tax payment “is always by confession,” Recto surmised some taxpayers are daunted by automatic imposition of huge penalties. “They want to do the right thing and pay correct taxes, but they are daunted by extremely harsh fines automatically imposed on them.”
Citing a World Bank report released in October 2015, Recto said red tape costs the country P140 billion in opportunity losses annually, adding that the same report ranked the Philippines at a low 95th among 189 economies in overall ease of doing business.
According to him, such savings, on the expenditure side, and simplifying tax-paying rules will “combine to raise money that will lessen the pain of the new taxes the Duterte administration is mulling over.”
He added: “Let us first conduct an inventory of our expenses. Where can we cut expenses? In short, savings, not of the brutal austerity kind, but operating overhead.”
Recto urged the Duterte administration to consider other options. “If we cut utilities and communications expenses, meaning power and cell-phone use, by just 10 percent, we will save P2.3 billion annually.”
He said officials should also target the reduction of the rent fees of government offices by 15 percent, which could translate into savings of up to P2 billion a year.