Press Release
July 15, 2015

Angara says SONA vow to lower taxes is PNoy's best goodbye gift

For Senator Sonny Angara, just one line by President Aquino in his last state of the nation address that he will lower personal income tax rates will be his best goodbye gift to the people.

"Of the thousands of words in his SONA, one of the most awaited and the one which will be most applauded is the President saying that he will back bills that will lower individual income taxes," said Angara, chairman of the ways and means committee and who is leading the charge in the Senate to slash income taxes.

Angara is author of a bill compressing the net taxable income brackets, and lowering tax rates especially for low- and middle-income earners.

He is hoping that among the bills the president traditionally mentions in the SONA as for priority approval are those that will revamp tax brackets.

The senator cited that 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 (VAT) at 12 percent.

He further noted that the country's current individual income tax bracket has remained unchanged since 1997 until today even when the consumer price index has already almost doubled.

"We need to think ahead and be competitive in the region but more importantly, we must give the Filipino people a break. Currently, a policeman and a teacher whose net taxable income is P150,000 are taxed at the third highest rate. Kung hahayaan lang natin ito at hindi tayo agad kikilos upang amyendahan ang sistema ng ating pagbubuwis, malamang ay sa mga susunod na taon, ang tax rate ng ating mga guro, nars at kapulisan ay sintaas na ng tax rate ng mga milyonaryo at bilyonaryo sa bansa," the senator said.

This injustice, Angara said, is called "bracket creep" where taxpayers who are not considered high earning are already pushed into high brackets. At some point, economists say, this bracket creep would lead to "fiscal drag where people will not have any purchasing power left to contribute to the economy due to excessive taxation. The senator, however, noted that Senate alone cannot pass the bill lowering income tax rates because of the Constitution's origination clause which provides that all revenue measures must originate from the House of Representatives.

Angara, a former congressman, said PNoy's mention of tax reforms in his SONA could mobilize support from the members of the Lower House, ending the embargo in serious discussion for lower tax rates.

"The Department of Finance has already expressed its openness to review and amend the tax rates and brackets, and we welcome this progress. We should let the executive guys run the numbers and tell us hanggang saan tingin nila pwede ibaba ang rates," he added.

In making one final push for lower income taxes, the lawmaker again calmed concerns by revenue officers that altering tax rates will punch a big hole in the coffers.

"Any revenue loss is recoverable. If withholding tax is converted into disposable income, then it can be recouped through the VAT on goods. If part of the salary intended to be remitted to the BIR will now be spent for goods, then it can still be recaptured through the tax on the goods bought," Angara explained.

"It will also be good for the economy. It is always better to plow money back in circulation, where it can stimulate the production and consumption of goods. Sometimes, instead of government doing the spending for the people, let the people do the spending themselves," he said.

Angara said his bill, once enacted into law, would retain more money in paychecks of ordinary salaried workers and would lead to greater voluntary compliance.

"It will also attract human capital and prevent the migration of our own to countries who do not reward industry and productivity with high tax rates," he stressed.

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