ANGARA WANTS MORE PROGRESSIVE, EQUITABLE TAX SYSTEM

Senator Juan Edgardo "Sonny" Angara emphasized the need to update and amend the "outdated" and "inequitable" tax system in the country, which, he said, hurts the middle-income earners more.

"Updating our tax system is an issue of equity. It's not an issue anymore of macroeconomics. That's all meaningless if the average person has nothing left for his family," said Angara, chair of the ways and means committee, yesterday during the second committee hearing on bills that seek to reduce income tax rates.

"In a highly unequal system like ours, talagang kawawa yung nasa gitna. So let's try to do something here," he added.

Angara's Senate Bill No. 2149 aims to adjust and compress income tax brackets, and reduce the maximum tax rate from the current 32 percent to 25 percent by 2017.

The neophyte senator revealed that the current top tax bracket, which includes those earning over P500,000 a year, was already the top tax bracket during the time of President Marcos.

"Can you imagine? With P500,000, my parents told me you can already buy a house and lot in the 70s and early 80s. Ngayon, kotse nalang mabibili mo doon.

"Tax brackets should be adjusted to make it more sensitive to current salaries of Filipinos. Because at present, a person who makes P50,000 a month--who is considered middle class--is already at the top tax bracket and is also paying the same tax rate as the billionaires in our country," Angara explained.

The lawmaker also pointed out that the tax burden in the Philippines is heavier that its neighboring countries.

For instance, in the Philippines, if one is earning P500,000 (or equivalent to US$11,000) a year, he or she will be taxed the maximum individual income tax rate of 32 percent already, as compared to Singapore's top tax bracket of US$250,000 with a tax rate of 20 percent.

In Indonesia, the top tax bracket of US$43,000 is taxed 30 percent; Malaysia with top tax bracket of US$30,000 is taxed 26 percent; and, Thailand with top tax bracket of US$123,000 is taxed 35 percent.

"Talagang nawala na yung pagiging progresibo ng ating tax system. Nawala na yung element of equity and fairness," Angara noted.

If the Angara bill will be enacted, the country's top income tax bracket would now be those earning over a million pesos (or equivalent to US$22,000) and will be taxed 25 percent by 2017.

Meanwhile, Punongbayan and Araullo, represented by Atty. Lea Roque, expressed support for the bill and suggested an automatic adjustment of the tax brackets and tax rates based on the consumer price index every three years without the need for legislative action.

Atty. Malou Lim of Isla Lipana and Co. also voiced out its support for the bill saying that lower taxes can result to higher capital inflow and higher purchasing power.

Atty. Benedicta Du-Baladad of the Financial Executives Institute of the Philippines, on the other hand, stressed the need to simplify the tax system for easier compliance and to improve collection.

The Department of Finance, however, reiterated its opposition on the proposed measure.

"At a personal level, of course, you would want to reduce tax rates. But as fiscal managers, we want to make sure that there's balance. If they can come up with ideas on how we can improve our revenue generation, our tax effort, then certainly that would be welcome," said Finance Undersecretary Jeremias Paul.

To which Angara responded, "If you're really vehemently against lowering the tax rates, what about updating the tax brackets at the very least as a minimum position? Because we're really not complying anymore with the command of the Constitution that we should have a progressive tax system."

According to recent reports, Malacanang has said it is open to considering proposals for lower income tax rates as long as it won't drastically affect the nation's coffers.

"We all want to lower taxes but we also must consider the plight of the government. We think measures to raise income are just as important as measures to raise revenue. It should be simultaneous with our moves to make the tax code more progressive, more equitable. As we correct some of the inequities in our highly inequitable society, we must also find a way to balance all these things," Angara said.