Lower income tax in three years REVENUE LOSS

essen the tax burden on wage earners and businesses while removing the unnecessary tax exemptions being enjoyed by some enterprises and individuals, that’s how the Duterte administration envision its tax reform proposal to Congress.

With this directive, Finance Secretary Carlos G. Dominguez III in a series of public speeches also trumpeted the administration’s economic plans.

In President Rodrigo R. Duterte’s first State of Nation Address, the chief executive pointed out that his administration will pursue tax reforms toward a simpler, more equitable, and efficient tax system that can foster investment environment and jobs creation.

The ultimate goal is to stimulate businesses and let Filipinos have more money to spend on their families.

Filipino workers currently pay the highest income tax in the entire Association of Southeast Asian Nations (ASEAN) region. Now, the administration plans to reduce the rates gradually over the next three years from 32 percent to 25 percent.

Along this line, the administration also wants to revisit and update the government’s tax tables on personal income which were put in place in 1997 when the Comprehensive Tax Reform Program was passed.

The current tax tables needed to be updated to reflect current economic conditions by adjusting it with inflation. The proposal is to raise the tax bracket to R1-million annual personal income from the present R500,000. This means that only those earning R1 million will be taxed the highest rate of 25 percent.

Likewise, the Philippines currently has the highest corporate income tax systems among its ASEAN peers, and the Duterte administration plans to lower this levy to attract investments and ultimately generate more jobs.

Like wage earners, the Duterte government wants to reduce the corporate rates on a staggered basis over the next few years to 25 percent from 30 percent. owever, the planned reduction comes with a cost to state coffers. If Congress passed the proposal into law, and enacted by the President, the government will incur revenue losses because of the lower tax collection. It will be hard pressed to look for other sources of revenues to compensate the losses. The Department of Finance has no official estimate yet as to revenue losses that the government will endure as a result of the reduced tax rates.

This is where the balancing act comes in between the interest of the Filipino people and taxes used to fund the government’s social services and projects, including the badly needed infrastructure.

The government needs taxes to finance its health program as well as other measures in ensuring children will spend more time in school and raise their chances of getting a good job in the future. All these initiatives rely on people’s hard-earned taxes.