DoF tax reform package too aggressive — Angara

THE Senate committee on ways and means will seek to temper the first tax reform package of the Department of Finance (DoF), with the committee chair, Sen. Juan Edgardo M. Angara, calling the proposal too aggressive.

“It’s quite aggressive basically the DoF package is quite aggressive. From zero pesos no [diesel] excise tax you’re going to six pesos,” Mr. Angara said in a television interview yesterday morning, the uncut transcript of which was sent to journalists as a press release.

Mr. Angara added that the six peso excise tax for gasoline and diesel proposed by the DoF would translate to an approximately 5%-6% increase in food prices.

Using this month’s retail prices as a benchmark, he explained that the measure would lead to a P10 per kilo increase in the price of pork, P7 per kilo increase in fish, and a P2 per kilo increase for both rice and sugar. Prices of sliced bread would increase by P2 per loaf.

Jeepney fares, meanwhile, would increase by P0.70, while bus fares would see a P1- P1.25 price increase depending on whether or not the bus is air conditioned.

The DoF also plans to increase the excise tax imposed on automobiles to 5% from 2% for automobiles priced below P600,000; 20% for those at P600,000 to P1.1 million; 40% for those at P1.1 million to P2.1 million; and 60% for vehicles above P2.1 million.

Mr. Angara reported that this would lead to an approximately 2% increase in the price of the Hyundai Eon small car, a 7% increase for the Toyota Innova minivan, a 20% increase for the Ford Everest SUV, and an 84% increase for the Toyota Land Cruiser SUV.

These excise taxes are among the measures proposed by the DoF to offset the revenue losses from the reduction of personal income tax (PIT) rates, in a method which the legislator also found too aggressive.

“They are very aggressive also on the cutting-side like their proposed income tax reforms,” said Mr. Angara.

In the DoF’s proposal, those earning not more than P250,000 annually would not have to pay personal income taxes.

For the first two years of the tax reform’s implementation, those earning more than P250,000 but not more than P400,000 would have to pay 20% of the amount in excess of P250,000; those earning over P400,000 but no more than P800,000 a charge of P30,000 plus 25% of the amount in excess of P400,000; those earning over P800,000 but no more than P2 million a charge of P130,000 plus the 30% of the amount in excess of P800,000.

Those earning over P2 million but not over P5 million will continue to pay the current top rate of 32%, charged P490,000 plus 32% of the amount exceeding P2 million.

The “ultra-rich” earning more than P5 million will pay P1.45 million plus 35% of the amount in excess of P5 million.

For the third year of implementation, personal income tax rates will be reduced to 15%, 20%, 25% and 30% respectively, while the ultra-rich and the tax exempt will have their personal income tax rates unchanged.

“That’s why they have to be aggressive also on the revenueraising side,” Mr. Angara said.

“For me, we should not have to be aggressive on both sides because it will shock a lot of sectors,” he added. Speaking for legislators, he said that they would only seek to index PIT rates to inflation.

“The country collects about P300 billion from its people and the DoF proposal will cut the collection in half,” he added. “For us lawmakers, our proposals to cut it or to update the tax brackets, you would lose about P50 billion. Under their package you will lose a 150 billion.”

The bill for the reduction of personal income tax and the fuel excise tax is currently pending at the committee level in the House of Representatives. —