The House Committee on Ways and Means is eyeing to approve next week a measure lowering individual and corporate income-tax rates, the panel’s chairman said on Tuesday.
House Committee on Ways and Means Chairman and Liberal Party Rep. Romero Quimbo of Marikina City, in a news conference, said the panel will present to the plenary the committee report on the consolidated measure lowering individual and corporate tax rates next week, or after 11 committee hearings.
“We are eyeing to approve the bill next week at the committee level, and approve it in the final reading in October,” Quimbo said.
Quimbo, one of the authors of the bill, said the revision of income taxes will be done through simplification of tiers and rates, and indexation to inflation.
“Tax brackets have remained unchanged since 1997 and have not been adjusted to inflation. And because workers’ salaries have been adjusted for inflation but tax brackets remain frozen, a vast number of workers have been pushed to higher brackets, thus, paying higher tax rates,” he said.
“The simpler the tax bracket, the simpler the computation, the easier for compliance,” Quimbo added.
The lawmaker said that, under the measure, public and private workers earning P180,000 and below will now be completely tax-exempt. In the current setup, those earning P10,000 or less a month pay a 5-percent income tax.
The bill also reduces the income-tax rate of those earning above P180,000 to P500,000, and above P500,000 to P10 million, from the current 30 percent to 9 percent and 17 percent, respectively.
He said the highest rate, at 30 percent, will be paid by those earning P10 million annually.
Currently, those with yearly earnings of P500,000 and above pay a 32-percent income tax. The measure will also reduce the corporate income tax rate, from 30 percent to 25 percent.
The Philippines has the second-highest individual income-tax rate in the region at 32 percent, next to Thailand and Vietnam’s 35 percent, and the highest value-added tax at 12 percent, as the country’s current individual income-tax bracket has been unchanged since 1997.
“The P500,000, which is currently taxable by 32 percent, needs to be adjusted, considering that this amounts to P1.2 million today, meaning ’yung original na gustong patawan ng tax rate noon ay hindi na mga tamang tao ngayon,” Quimbo said.
Earlier, Finance Undersecretary Jeremias Paul warned lawmakers that 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.
“We need to have a compensating measure. It has to be revenue-neutral,” Paul said. To recover revenue losses, Quimbo said Congress would also approve revenue-generating measures, including the bill raising the excise tax on fuel, the fiscal incentives rationalization bill, the proposed Tax Incentives Management and Transparency Act, the Customs Modernization and Tariff Act, the Rationalization of the Mining Fiscal Regime and the bill imposing specific tax on sodas and other sweetened beverages in September.