Prioritize income tax cuts now, new taxes later—House leader

MANILA—A leader at the House of Representatives called on his colleagues to pass separately the long-sought personal income tax (PIT) reform as it is being “held hostage” by the contentious comprehensive tax reform package of the Department of Finance (DOF).

In a statement on Thursday, Deputy Speaker and Marikina Rep. Romero Quimbo said the lowering of the PIT should not be bundled with “massive” new taxes that further impede the immediate tax relief for salary workers, who have been bearing the brunt of tax collection.

“What is happening now is that the personal income tax reform we have been asking for is being held hostage by the DOF who has promised to ‘release’ it only if Congress gives a ransom in the form of additional excise taxes on fuel and other additional new taxes,” Quimbo said.

Quimbo added that forcing this “radical overhaul” is “imprudent, time-wasting, and fiscally unhealthy”.

DOF’s proposal, which was adopted by Quirino Rep. Dakila Cua in House Bill No. 4774, provides for the adjustment of the PIT brackets to correct so-called income creping; reduce the maximum rate to 25 percent over time from 32 percent at present, except for the highest income earners; and shift to a modified gross system to simplify the PIT system.

To compensate for the revenue losses from the reduced income taxes, some of the offsetting measures include increasing excise tax rates on all petroleum products and automobiles; expanding the value added tax (VAT) base by limiting exemptions to raw food and other necessities; and taxing Philippine Charity Sweepstakes numbers’ game and lotto winnings, among others.

Quimbo argued that the concept of imposing excise taxes on gasoline and new taxes should undergo a more exhaustive study to ensure that the poor will not be the hit by the new taxes.

More consultations should also be conducted with the affected sectors whose tax privileges will be withdrawn such as the Business Process Outsourcing (BPO) companies, cooperatives, socialized housing, and the automobile industry, he noted.

“Let us not rush the imposition of these new taxes, some of which we have already seen as failures in the Philippine setting today. The process will obviously take time. Meanwhile, the long-suffering income tax earners are caught in the crossfire,” Quimbo said.

The Marikina lawmaker explained that implementing tax reforms must be done in phases, noting that adjusting the tax brackets to inflation brings immediate relief for Filipino taxpayers while buying more time to fine-tune and polish comprehensive reforms.

“It is becoming increasingly clear that we have to do tax reform in phases so as not to delay the much-needed inflation-adjustment of individual income tax. The taxpayer today is akin to a patient dying in the ICU. The first order is to make him survive,” Quimbo said.

“We need to first implement an immediate tax relief to make him live while discussions on sweeping restructuring are ongoing. It also does not preclude the government from eventually changing the income tax schedule and imposing new taxes.” he added.