The ‘ultra-rich’ or those earning P5 million or more annually will be taxed 35 percent of their income under the proposed tax reform package, Finance Secretary Carlos Dominguez said Wednesday.
Dominguez said those earning over P5 million annually would be taxed a high of 35 percent under tax reform proposal which would be submitted to Congress before the end of the month.
“For the highest income earners, which are those earning P5 million and above, we are planning to increase that from 32 [percent] to 35 percent,” Dominguez told reporters at the sidelines of the oath-taking ceremony for newly appointed officials of the Finance Department.
Dominguez said the ‘ultra-rich’ would face higher taxes, so that the government could ease the tax burden on those earning less. “For those who earn less than P3 million [a year], [the income tax rate] will go down, [they] will get a tax break,” Dominguez said.
Newly-appointed Finance undersecretary Antonette Tionko said those earning P3 million to P5 million a year would be taxed 32 percent, while those earning below P3 million twould be taxed 25 percent.
Tionko said those earning more than P5 million were considered ultra rich. “It’s very low, and actually if you’re earning P5 million and up, based on the World Bank data, you’re considered ultra rich,” Tionko said.
Tionko said the current seven tax brackets would be streamlined to about six or five brackets. The proposal is one of the five packages the Finance Department will present to Congress.
Package one includes the adjustment of brackets to correct income creeping; reduction of the personal income tax maximum rate to 25 percent over time, except for the highest income earners to maintain progressivity; and to shift to modified gross system to simplify the personal income tax system.
The department said along with the reduction in the personal income taxes, tax exemptions currently enjoyed by single, married and with dependents would be lifted.
“It means that basically, since the threshold, the lowest bracket is very high, we can do away with the exemptions, because when you have a child, you have to present evidence that you have a child at this age. It’s simplifying it, so the first bracket is high. So it’s gonna get covered already,” Tionko said.
The current tax system provides that single individuals and married individuals with no qualified dependents enjoy a P50,000 tax exemption annually while married individuals also enjoy P50,000 tax break and an additional P25,000 tax exemption for each qualified dependent up to four children.