Europe-PH News

Business groups continued to push for tax reforms even if the government appears lukewarm to the proposal.

The e groups wanted legislators to immediately pass the following measures: adjust and re-structure the income tax brackets for individuals; index the income tax brackets on the basis of Consumer Price Index every three years; and reduce the personal and corporate income tax rates.

A unity statement was signed by 18 coalitions of employees, employers, trade groups, chambers of commerce, and professional organizations in support of the various income tax reform measures pending in Congress.

The groups who signed are hoping to restore fairness in the Philippine tax system and make it competitive with ASEAN neighbors.

The groups which expressed their support are the Tax Management Association of the Philippines, Pilipino Banana Growers and Exporters Association, Japanese Chamber of Commerce & Industry of the Philippines, American Chamber of Commerce of the Philippines, European Chamber of Commerce of the Philippines, Alliance of Workers in the Informal Economy/Sector, Foundation for Economic Freedom, Canadian Chamber of Commerce of the Philippines, and the Korean Chamber of Commerce of the Philippines.

Also included are the Philippine Association of Multinational Companies Regional Headquarters, Federation of Filipino-Chinese Chambers of Commerce and Industry, Management Association of the Philippines, Philippine Chamber of Commerce and Industry, Confederation for Unity, Recognition and Advancement of Government Employees, Australia-New Zealand Chamber of Commerce, FINEX, Center for Strategic Reform, and the Makati Business Club.

“The inherent inequity in the tax system is brought about by the fact that the top bracket of P500,000 has remained unchanged since 1986,” the statement said.

“Meanwhile, inflation has pushed up consumer prices by more than 300 percent resulting to the so-called “bracket creep”. Inflation has pushed up nominal wages and salaries into higher tax brackets causing increases in income taxes but no increase in purchasing power,” it added.

The groups said that the government has been unjustly relying on inflation to collect more taxes from salaried workers, who bear the bulk of the tax burden among individual taxpayers, rather than through efficient tax administration.

“In place of manually adjusting tax brackets (which the government has not done in nearly 20 years), “bracket creep” can easily be countered by a system of index-linked tax brackets,” the groups said.

“Therefore, automatic indexing every three years of tax brackets on the basis of CPI will ensure that taxes will increase only as the real income of salaried individuals increase,” they added.

The statement also pointed out that the Philippines effectively imposes the highest personal income tax rate on the same taxable income of P500,000, or its equivalent, and the highest corporate income tax rate among the ASEAN-6 countries.

“Reducing the personal and corporate income tax rates will make the Philippine workforce and corporations doing business in the Philippines competitive with their ASEAN neighbors,” the statement said.

The groups said that contrary to the view that reducing personal and corporate income tax rates will increase the budgetary deficit due to a reduction of tax revenues, studies have shown that a reduction in tax rates, together with the simplification of the tax system, will help spur tax compliance and, thus, broaden the tax base and improve tax effort.

“A reduction in the rates will also increase disposable income for domestic purchases of goods and services that will, in turn, increase the government’s tax take of consumption taxes,” the statement said.

Source: Malaya