REDUCING income taxes will not only adjust rates to inflation but will allow taxpayers recover part of the “payroll taxes” they are forking over to the government.
Senate Committee on Ways and Means Chairman Juan Edgardo “Sonny” Angara cited this “another form of exaction” in pressing the need for lower and “reasonable” personal income tax rates.
Angara said that if mandatory contributions to PhilHealth, GSIS or SSS, Pag-IBIG Fund are joined with the taxes withheld, the total tax bite could be up to 45 percent of an individual’s income.
“And, remember that what remains of the take-home pay, the portion that can actually be taken home, when spent, is subjected to a 12-percent value added tax,” Angara said.
“At marami pa tayong hidden taxes. ‘Yung stranded cost sa electric bills natin kasama doon,” he added.
The neophyte senator said, “All these taxes and mandatory contributions, when added to the rise in the prices of basic goods such as rice, fuel and electricity, eat into the family income.”
“To cope with this erosion of purchasing power, the government cannot just always raise wages. The best relief is to lower the income tax so that a family will have more retained income to spend for their basic needs,” Angara stressed.
Angara noted the top bracket in the current personal income tax schedule of P500,000 was pegged way back in 1977.
“Sabi nung mga nakakatanda sa akin na at that time, you can buy 10 brand new cars or even a house and lot in an exclusive subdivision for that amount. So talagang kailangan na baguhin ito,” Angara pointed out.
Although the present seven-bracket income tax rates were modified in 1997, the consumer price index has doubled since, Angara said. “Ang P200,000 na income ngayon ay nagkakahalaga lang ng P100,000 noon kaya dapat ang batayan ng buwis ay baguhin na rin.”
“What our Constitution says is that you must have a progressive system of taxation, meaning, if you’re richer, you pay more. If you earn just a little, the government will not take much from you kasi nga kailangan mo pa pakainin, paaralin ang mga anak mo,” Angara explained.
He said this “progressive taxation” trait ceases when we still impose a 500,000-peso threshold for the top-earning people which has been there since 1977.
But even those in other tiers are hit hard by a tax system that is now in need of amendment, Angara said.
To solve this, Angara has authored Senate Bill 2149 which compresses the net taxable income brackets from the present seven to five, and lowers 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 bill, the “no tax zone” will be raised to P20,000.
As to the next bracket under his proposal—from P20,000 to P70,000—Angara 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 P2,250 plus 15 percent of the amount over P30,000.
Angara is also proposing to slash the current highest tax bite of 32 percent for income above P500,000 to 25 percent for income above P1 million by 2017.
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