Angara: 'Outdated' system makes middle class pay same taxes as billionaires

By: Ernie Reyes, InterAksyon.com

June 5, 2014 10:22 AM
MANILA, Philippines -- The countrys outdated and inequitable taxation system makes
middle-income earners pay the same taxes as billionaires and needs to be updated
immediately, Senator Juan Edgardo Sonny Angara said Thursday.
"Updating our tax system is an issue of equity. It's not an issue anymore of macroeconomics.
That's all meaningless if the average person has nothing left for his family," Angara, who chairs
the Senate ways and means committee, pointed out at the panels second hearing on bills that
seek to reduce income tax rates.
"In a highly unequal system like ours, talagang kawawa yung nasa gitna (those in the middle
are hit hardest). So let's try to do something here," he stressed.
Angara pointed out that the current top tax bracket, which covers those earning more than
P500,000 a year, has remained unchanged since the time of the late President Ferdinand
Marcos.
"Can you imagine? With P500,000, my parents told me you can already buy a house and lot in
the 70s and early 80s. Ngayon, kotse na lang mabibili mo doon (Today, you can only buy a car
with that money), he said.
"Tax brackets should be adjusted to make (these) more sensitive to current salaries of Filipinos.
Because at present, a person who makes P50,000 a month -- who is considered middle class -is already in the top tax bracket and is also paying the same tax rate as the billionaires in our
country," Angara explained.

The lawmaker also pointed out that the tax burden in the Philippines is heavier than in
neighboring countries.
A Filipino earning P500,000 (equivalent to US$11,000) annually is taxed the maximum 32
percent while in Singapore, where the top tax bracket starts at US$250,000, the tax rate is only
20 percent.
In Indonesia, the top tax bracket of US$43,000 is taxed 30 percent; Malaysias top tax bracket of
US$30,000 is taxed 26 percent; and Thailands top tax bracket of US$123,000 is taxed 35
percent.
"Talagang nawala na yung pagiging progresibo ng ating tax system. Nawala na yung elements
of equity and fairness (Our tax system is no longer progressive. The elements of equity and
fairness are gone)," Angara said.
Angaras Senate Bill No. 2149 seeks to adjust and compress income tax brackets, and reduce
the maximum tax rate from the current 32 percent to 25 percent by 2017.
If enacted, the countrys top income tax bracket will be pegged at over P1 million (equivalent to
US$22,000) and taxed 25 percent by 2017.
At Wednesdays hearing, the law firm Punongbayan and Araullo, represented by lawyer Lea
Roque, backed Angaras bill and suggested the automatic adjustment of the tax brackets and
tax rates based on the consumer price index every three years, without the need for legislative
action.
Lawyer Malou Lim of Isla Lipana and Co. also backed the bill, saying lower taxes would result in
higher capital inflow and higher purchasing power.

Lawyer Benedicta Du-Baladad of the Financial Executives Institute of the Philippines, on the
other hand, stressed the need to simplify the tax system for easier compliance and improved
collection.
But the Department of Finance reiterated its opposition to the measure.
"At a personal level, of course, you would want to reduce tax rates, Finance Undersecretary
Jeremias Paul said. But as fiscal managers, we want to make sure that there's balance. If they
can come up with ideas on how we can improve our revenue generation, our tax effort, then
certainly that would be welcome."
To which Angara responded: "If you're really vehemently against lowering the tax rates, what
about updating the tax brackets at the very least as a minimum position? Because we're really
not complying anymore with the command of the Constitution that we should have a progressive
tax system."
Malacaang has been reported as being open to considering lower income tax rates so long as
these do not drastically diminish the nations coffers.
"We all want to lower taxes but we also must consider the plight of the government. We think
measures to raise income are just as important as measures to raise revenue. It should be
simultaneous with our moves to make the tax code more progressive, more equitable. As we
correct some of the inequities in our highly inequitable society, we must also find a way to
balance all these things," Angara said.

Source: http://www.interaksyon.com/article/88403/angara-outdated-system-makes-middle-classpay-same-taxes-as-billionaires