No tax on 11-M yearly personal income
DOF weighs proposal
The Department of Finance (DOF) is looking at exempting individuals who are earning not more than R1 million annually from paying income tax.
Finance Secretary Carlos G. Dominguez III said yesterday that the government will include an all-in income tax exemption of R1 million in its proposed comprehensive tax reform package to help the growing Filipino middle class.
“The tax table is created in 1997 and the maximum tax exemption at that time was R500,000. Then and now are not the same, you will reach the R500,000 max tax exemption very quickly,” Dominguez sad. “I think that’s not fair.”
“We think that has to be adjusted for some kind of adjustment recognizing inflationary factors,” he told reporters on the sidelines of the Financial TimesFirst Metro Investment Corp. Philippine Investment Summit.
The finance department is currently in consultations with the lawmakers in coming up with the new tax table, Dominguez said.
The previous administration had proposed to include an all-in tax exemption for those earning R1 million and below yearly in the proposed tax refrom, but it should be compensated by an increase in the value-added tax (VAT) rate to 14 percent and the expansion of the VAT coverage.
Higher VAT rate proposal, however, was rejected by the Duterte administration.
On tax reform, Dominguez said the DOF would focus on growing the middle class and energizing businesses by lowering personal and corporate income taxes.
To offset the projected drop in revenues as a result of lower income tax rates, Dominguez said the government would broaden the tax base, reform the collections systems, and eliminate graft and corruption in revenue-generating agencies.
“I am sure there is a
way to keep the budget balanced while growing the middle class,” Dominguez said.
In the Bureau of Internal Revenue (BIR), Dominguez said measures would be implemented to plug loopholes and make revenue collections more efficient in its Large Taxpayers Unit, which is in charge of collecting taxes from the country’s biggest industries.
“If this unit can collect more efficiently, it should be possible to raise enough revenues at least to compensate for the lower tax rates,” Dominguez said.
In the Bureau of Customs, Dominguez said the government would have to upgrade the agency’s capabilities to fight smuggling, which — according to World Bank estimates — denies the government billions of dollars in potential revenues.
He noted that while the past administration succeeded in getting the country out of the boomand-bust rut and in sustaining quarter-on-quarter growth, it had unfortunately hesitated to spend what it had borrowed, which resulted in “chronic underspending and a severe shortfall in infrastructure.”
“When our voters cast their votes last May, they delivered a strong message,” he said. “We can no longer do business as usual. We have to start innovating, not just the technological foundations of our society, but its ethical premises as well.”
Dominguez said he is confident that the new administration “will get to some approximation” of its vision to significantly bring down poverty by 2022 through “massive investments in infrastructure, education and public health.”
He said, “It will have been boosted by gains in honest government and a perceptible decline in corruption. It will be consolidated by proper dispersal of economic activity and improvements in our logistics system.”
Dominguez said he imagines a Philippines, by the approach of Duterte’s last 100 days in office, leading the region in sustainable growth.
“That growth will happen in a climate of peace and order,” he said. “It will happen in the context of superior business confidence in our institutions of governance, a high degree of transparency and a committed bureaucracy.”
Dominguez said that, “Lastly, this will be a country equipped with the civic virtues necessary for all civilizations to thrive. Public discipline will be unlike anything we have seen before. Respect for the environment will be paramount. The nation’s resources will be there for everybody to share, as long as the needs of the future are not compromised.”
He noted that even with the tools of modern finance, countries have failed to match the successes of their economies with the ability to make growth inclusive.
Modern finance, along with the instruments of digital technologies, has made it easier to profit from an idea, which is why the global economy has produced “billionaires like rabbits” over the last 20 years, Dominguez said.
“The power of modern finance, however, is not matched by an ability to be inclusive. Poverty rates rise at a faster rate than wealth is created,” the finance chief said. “Communities that could not cope are obliterated. Nation-states are shredded as in Syria or defended as in Britain.”
This confusion has led to a clash of concepts, with modernity pitted against ancient wisdom, Dominguez said. “Orthodoxy is challenged; novelty is not always welcome,” he added.