MANILA-While he welcomed the “openness” of the Bureau of Internal Revenue (BIR) to lower income tax rates, Senator Juan Edgardo "Sonny" Angara expressed hope that the BIR proposal will be submitted sooner, possibly in July so that President Aquino can include it in the “wish list” that he will ask Congress to consider during his State of the Nation Address this year.
“The earlier it is submitted, the more time we can study it, and the better our bill will be,” said Angara, chair of the Senate ways and means committee.
“The dynamics in legislation is that it will take a year for a bill to be passed into law. So I think submitting it this July will fit just right in the congressional template of doing things,” he stressed.
“And, even if the BIR is thinking of a delayed effectivity date for the law, there is still merit on the idea of submitting its proposal way ahead," he added.
The senator said the tax agency should not treat its estimated annual revenue loss of P43 billion from reduced individual income rates as “unrecoverable.”
“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 be also good for the economy. It is always better to plow money back in circulation, where it can stimulate the production and consumption of goods. Instead of government doing the spending for the people, let the people do the spending themselves,” he pointed out.
Angara is author of a bill compressing the net taxable income brackets from the present seven to five, and lowering tax rates across-the-board.
At present, an annual net income, after allowable deductions, of P10,000, which is the lowest in the tiers, is taxed 5 percent.
Under Angara’s Senate Bill 2149, the “no tax zone” will be raised to P20,000.
As to the next bracket under his proposal—from P20,000 to P70,000—he wants a tax of 15 percent in 2015, to go down to 13 percent in 2016, and further to 10 percent by 2017.
Currently, a net taxable income of between P30,000 and P70,000 is taxed P2,500 plus 15 percent of the amount over P30,000.
The neophyte senator is also proposing to slash the current highest tax bite of 32 percent for income above P500,000 to 22 percent by 2017.
Once enacted into law, Angara's bill will retain more money in paychecks of ordinary salaried workers.
“A policeman whose net taxable income is P150,000 at present pays P25,000 in income tax. Under my proposal, he will just pay P19,000 by 2017," he noted.
Citing another example, the lawmaker said a small business owner whose net taxable income is P550,000 a year will see his tax payment go down to P97,500 in 2017 from the present P141,000.
He emphasized that the smaller tax rates will lead to greater voluntary compliance.
“It will also attract human capital and to prevent the migration of our own to countries with lower tax rates and do not punish industry and productivity with onerous tax rates," Angara said.
