Lowering tax rates possible
DAVAO CITY—The incoming Duterte administration on Monday raised the possibility of lowering the maximum income tax rates being levied by the government and vowed it will study how the pension could be raised for private employees.
“The maximum income tax rate should be reduced from 32 percent to 25 percent,” incoming Budget Secretary Benjamin Diokno said in a television interview.
“[Carlos] Dominguez and I are working on making [the] tax systems efficient and competitive with neighbors.”
Citing the transition meetings between the economic teams of Duterte and outgoing President Benigno Aquino III, incoming Finance Department spokesman Paula Alvarez said the incoming administration will review if any implementation of the proposed tax reform package handed over by the Aquino administration and the pension increase proposal for Social Security System members will prevent bankruptcy.
“In the tax reform package that they submitted, the stance of Secretary Dominguez is to study things first—because the package being given to us transpired six years in the making but weren’t passed,” Alvarez said.
“We will study that carefully because we cannot adjust without back-up data [supporting] it could sustain the government,” Alvarez said.
She said the people may be assured of a thorough discussion of a bill increasing the SSS pension that was vetoed by President Benigno Aquino III.
“For the SSS, we are studying that very carefully because it sparked a lot of debate. Our goal really is to increase the pension but to avoid any bankruptcy of the SSS as a system,” Alvarez said.
The outgoing Aquino administration last May handed over to the incoming government a P77-billion tax reform package for its study, which includes a gradual lowering of the highest personal and corporate income tax levies to 25 percent and restructuring the brackets to four.
Currently, the rates are pegged at 32 percent for individuals and 30 percent for companies. There are also seven tax brackets.
The lowering of the rates will only be triggered by a rise of the tax effort up to 16.5 percent, Finance data showed. As of the first quarter, the figure was at 13 percent.
Those earning P1 million a year will also be exempted from income taxes. The combined revenue losses for the two is pegged at P222 billion in the first year to be offset by an excise tax reform that will bring in P132 billion in the first 12 months.
Aquino in January, meanwhile, blocked the proposed P2,000 across-the-board increase of the monthly SSS pension, saying this will eventually drain the agency’s fund reserves.
Diokno said the calls for a reversal of the expanded-Value Added Tax to its original state at 10 percent would have to wait longer, even as the International Monetary Fund noticed the country’s VAT rate being “mildly progressive.”