The Aquino administration’s Cabinet cluster on economic development has already thumbed down the proposal lowering individual income-tax rates, which, based on the estimate of House Committee on Ways and Means Chairman Rep. Romero S. Quimbo, will cost the government P100 billion in revenues—equivalent to the 2015 budget of the Department of Health.
With this, a ranking member of the House majority told the BusinessMirror that the 13 bills in the lower chamber seeking to give tax relief to millions of individual earners have lost any chance of being passed in the current Congress.
“The Cabinet cluster on economics and finance [has] thumbed down the proposal… no more chance [to pass this] in the 16th Congress,” said the source, a member of the House Committee on Ways and Means.
The Cabinet cluster on economic development is led by Department of Finance (DOF). Also part of the cluster are the Department of Trade and Industry, Department of Budget and Management, National Economic and Development Authority, Department of the Interior and Local Government, Department of Public Works and Highways, Department of Transportation and Communications, Department of Energy, Department of Science and Technology, Department of Tourism and Department of Agriculture.
According to information obtained by the BusinessMirror, the DOF is vigorously blocking the passage of the proposal due to its revenue implications. The Aquino administration has just enacted the law raising the cap for tax-exempt bonuses to P82,000 from P30,000. The DOF had said this would already result in revenue loss to the government of about P30 billion per year.
Quimbo said the government stands to lose another P100 billion annually should Congress give in to the measure on income-tax reforms.
The 13 bills seek to amend the National Internal Revenue Code. In Quimbo’s bill, individuals earning below P180,000 annually will be exempted from paying income tax. In the current setup, those earning P10,000 or less per month pay 5-percent income tax.
Quimbo’s version also reduces the income-tax rate of those earning above P180,000 to 5 percent. The highest rate at 32 percent will be paid by those earning P1.4 million annually. Currently, those with yearly earnings of P500,000 and above pay 32-percent income tax.
The proposed measures also seek the revision of income taxes for compensation income earners, self-employed and professionals and corporations through the simplification of tiers and rates, and indexation to inflation.
Quimbo’s projection on revenue losses is higher than the DOF’s. Finance Undersecretary Jeremias Paul Jr. said in a congressional hearing that the bill reducing the individual income-tax rates may cause the government to lose revenues totaling as much as 1.5 percent of the country’s gross domestic product, or P30 billion.
Paul, thus, urged members of the lower chamber to adopt a holistic approach in studying the proposals to overhaul the tax system in order to pass laws that will balance the government’s fiscal needs and the taxpayers’ welfare.
But Quimbo denied that claim of the BusinessMirror source that the economic cluster has already rejected the measure. “That’s not true; we are one [with DOF] in pushing for hol wistic tax-reform package,” he said.
Quimbo earlier admitted that the target approval date of the measure lowering individual income-tax rate has been moved to December, or six months later than the lower chamber’s June 11 target approval.
Quimbo said the panel has decided to prioritize and approve first the passage of other revenue-generating measures such as the bills raising the excise tax on oil, the fiscal incentives rationalization bill and the proposed Tax Incentives Management Act.
The BusinessMirror source insisted that income-tax measure will no longer be passed during the Aquino administration. The source said even if the Congress wants the bill lowering individual tax to become a law, both chambers should pass it by June this year because the months of August and September dedicated are for the annual budget deliberations, while the remaining months are already the beginning of the campaign period for the 2016 national elections.