Press Release
September 30, 2016


Senator Sonny Angara has urged the government to prioritize the indexation of income tax rates, which entails correcting and adjusting the tax brackets to inflation, to provide immediate tax relief and raise the take-home pay of Filipino workers.

The Department of Finance (DOF) has submitted to both houses of Congress a draft bill, the first of the six packages, that seeks to lower personal income taxes while broadening the value-added tax (VAT) base and adjusting excise taxes of petroleum products and automobiles.

"While we give full credit to the Duterte administration for prioritizing income tax reform, I suggest we first work on the indexation of our existing tax rates to give our ordinary taxpayers immediate relief that is truly long overdue," said Angara, chairman of the ways and means committee and the Senate's leading voice in pushing for tax reform.

The senator, during a tax forum organized by the Senate Tax Study and Research Office on Thursday, commended the DOF for coming up with a "lengthy and meaty" set of recommendations for tax reform within the first 100 days of the administration.

He said he expects extensive debate over the comprehensive tax reform package since different sectors will be affected by the proposal.

Outdated tax system

Under the current tax system enacted in 1997, individuals with taxable income of over P500,000 are taxed with a fixed amount of P125,000 plus the 32 percent of the excess over P500,000.

The lawmaker pointed out that P500,000 in 1997 does not have the same value today due to inflation. P1 in 1997 when adjusted for inflation is now worth only 44 centavos.

Middle-income earners, who were mostly taxed at 20 or 25 percent in 1997, are now pushed into the top tax bracket at 32 percent together with the billionaires of the country because of the outdated tax system.

"Instead of delaying further the tax relief of our workers, why don't we pass first the indexation of our unjust tax rates? I appreciate the thought and work the DOF has put into this. These reforms are nice in theory but in reality, they have to be funnelled through a political medium which is the legislature," said Angara, author of Senate Bill 129 that seeks to adjust tax brackets to inflation.

Under the DOF proposal, those earning below P250,000 a year will be exempted from tax, while the tax rates of the "ultra rich" or those earning P5 million and above annually will be raised from 32 percent to 35 percent.

Revenue losses from the personal income tax reform, amounting to P180 billion, will be offset by expanding the VAT base by limiting exemptions to raw food, education and health.

As a result, laws exempting senior citizens and persons with disabilities (PWDs) from VAT will be repealed.

'Keep VAT exemption for seniors, PWDs'

Republic Act 10754, which exempts PWDs from VAT, was sponsored by Angara and was only signed into law in March of this year.

Republic Act 9994 or the Expanded Senior Citizens Act of 2010, which grants VAT exemption to senior citizens, was also authored by Angara during his days in Congress while his father, former Senate President Edgardo Angara, is known as the father of the senior citizens law.

"Ang mga batas na 'yan ay pinasa ng Kongreso dahil nakita namin na hindi pa kayang ipagkaloob ng gobyerno ang lahat ng pangangailangan ng ating mga senior citizen at kababayang may kapansanan. Maliwanag na ang mga batas na ito at may saysay at puso. Huwag muna sana nating tanggaling ang mga benepisyong ito o yung exemption na ibinibigay sa kanila hanggat wala pang tiyak na subsidiya," Angara said.

Finance Secretary Carlos Dominguez III said the government plans to replace the VAT exemption to seniors with direct and more targeted subsidies.

Moreover, the DOF bill increases excise tax rates on all petroleum products and automobiles.

"Interest groups are already coming to us--the cooperatives, seniors, PWDs, oil companies, transport groups--a collective voice of already 10 to 15 million Filipino people that we should not ignore," Angara said.

"Dapat ay marinig natin ang sentimyento ng ating mga kababayan lalo na ang mga apektadong sektor dahil hindi pare-pareho ang epekto nito sa iba't ibang antas ng lipunan. Tiyakin natin na hindi madedehado ang mga mahihirap at ang ating middle class sa usaping ito," he added.

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