TO INCREASE the level of compliance and reduce the number of Filipinos who do not pay taxes, a lawmaker has filed a bill at the House of Representatives seeking to amend the National Internal Revenue Code (NIRC) by restructuring the country’s income tax system effectively reducing both individual and corporate income taxes.
House Bill (HB) 4099 was filed last March 10 by Valenzuela City Rep. Magtanggol T. Gunigundo I (2nd district). It was referred to the House committee on ways and means last March 11 for consideration.
Under HB 4099 or the Proposed Act Amending Sections 24 and 27 of the NIRC (Republic Act 8424), individual and corporate income taxes rates would go down to 15% from the current 32% and 30%, respectively.
EXEMPTED
HB 4099 states that individuals earning gross income below P180,000 annually or whose net taxable income is below P30,000 are exempted from income tax while those earning P180,000 to P190,000 per annum will enjoy a tax relief of P6,750 per annum.
The current law provides that those individual/married/head of the family with net taxable income of P130,000 has tax due of P20,500, but under the proposed measure their tax due is only P9,500 annually.
"For married individual taxpayers with one dependent whose annual net taxable income is P105,000, the tax due is P15,500 but with the proposed measure they will only pay P7,000," the bill said.
The bill noted that for married couples with two dependents and the annual net taxable income is P80,000, the tax due is P10,500. But under the bill, the tax due will go down to P4,500.
Those married individuals with three dependents with net income of P55,000 currently needs to pay P6,250 compared to the P4,000 under the proposed measure, while those married with four dependents with P30,000 income and with P2,500 tax due will be paying P1,500 under the proposed measure.
The bill also suggests for corporate income tax a flat rate of 15%.
"This will definitely reduce the number of Filipinos who do not pay taxes. Lower taxes means higher level of compliance," Mr. Gunigundo said in the explanatory note of the bill.
He noted though that with the said tax reductions, the government stands to lose at least P90 billion.
"The initial revenue drop around P90 billion in income taxes should not deter Congress from reducing income tax rates. The bigger picture, which is the Philippine economy, will in the long run gain much more in terms of lower unemployment, more VAT (value-added tax) collections, a happier people and more productive citizenry," Mr. Gunigundo told reporters in a press conference yesterday.
He added that the tax reduction will also stimulate the economy "by providing individual taxpayers more after-tax income or disposable income which they can either save or spend in the engagement of services or purchase of goods that are subject to VAT."
"Corporate taxpayers on the other hand can use up after-tax income for giving out more dividends to shareholders which they in turn may also consume in the purchase of VAT-able goods. Aside from these, corporate taxpayers may invest in the purchase of modern equipment, infrastructure, facilities upgrade, research and development, etc," he said.
MORE JOBS, SALES
Mr. Gunigundo assured that with the expected increase in sales, more jobs will be created to meet the increase in demand due to the enhanced purchasing power of consumers.
"With the impending 2015 Association of Southeast Asian Nations (ASEAN) integration, the tax rates of our country must be competitive enough to attract more foreign direct investment that will generate jobs to wipe out unemployment in our county," he said.
Mr. Gunigundo noted that around 40% of the country’s gross domestic product (GDP) comes from the informal economy which do not pay taxes. "Reduced income tax rates would serve as an incentive to leave the informal economy and go mainstream. This will broaden the tax base and improve revenue compliance of taxpayers," he said.
Under HB 4099, corporations under special economic zones will continue under the tax-exempt regime until the expiry date of their contracts with the government.
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