Senate tackles proposal to lower estate taxes

The Senate Committee on Ways and Means has started deliberations on various proposals that seek to lower and simplify estate tax rates to ease the burden of bereaved families.

Sen. Juan Edgardo Angara, chairman of the panel, took note of the approval in the House of Representatives on third and final reading two bills granting amnesty in the payment of estate taxes, and simplifying the estate tax rate at six percent.

At present, the National Internal Revenue Code exempts from tax a net estate of up to P200,000, and imposes four tiers of taxes from five percent to 20 percent based on the value of assets.

Heirs to properties worth P10 million and above have to pay P1.2 million plus the 20 percent of the excess above P10 million.

“Like the income tax rates, estate tax rates have not been updated since 1997. This tax burden has led families to delay settling the estate, resulting in huge penalties and surcharges while use of assets are not maximized,” Angara said during a hearing on Tuesday.

He also cited data from Philippine Statistics Authority, which showed that with an annual average of deaths of 445,000 from 2000 to 2013, only 30,000 filed estate tax returns.

“This could also be the reason why there are many estates that remain idle and are not economically productive,” Angara said.

Collection of estate taxes averages P1 billion yearly from a reported potential of P10 – P50 billion.

To address this, seven different bills were filed by Angara ( Senate Bill 980), and Senators Richard Gordon and Loren Legarda (SB 107), Nancy Binay (SB 1053), Francis Escudero (SB 769), Senate Majority Leader Vicente Sotto III, Senate Minority Leader Ralph Recto (SB 867), and Senate President Aquilino “Koko” Pimentel (SBs 293 and 294).

Under Angara’s SB 980, estate tax brackets will be indexed to inflation, thereby adjusting the minimum net estate subject to estate tax from P200,000 to P460,000. The estate tax brackets shall be adjusted every three years thereafter.

The proposed measure also adjusts the allowable deductions to make it more realistic and equitable such as funeral expenses ( from P200,000 to P500,000), the value of the family home (from P1 million to P2 million), standard deduction (from P1 million to P2 million), medical expenses (from P500,000 to P1 million) and the allowable bank withdrawal (from P20,000 to P200,000).