I feel this current discussion on reforming the tax system may create a need for a Philippine Tax Institute. An independent institution that can evaluate, analyse and advocate proposals for changes in the system without bias but for what is best for efficiency and effectiveness of the purpose of the tax applied.
From BusinessWorld Philippines
September 11, 2014
Tax overhaul must reform system, says industry group
THE TAX Management Association of the Philippines, Inc. (TMAP) has suggested the adoption of a three-pronged approach in reforming the country’s tax system, supporting pending measures in Congress as well as suggesting new ones to support its proposal.
TMAP President Rina-Lorena R. Manuel, in a position paper submitted to the ways and means committees of both houses of Congress, said proposals to amend the country’s tax system should address three “Rs”: rectifying the tax base, reducing the rates, and reforming the system.
Ms. Manuel said updating the country’s tax thresholds under the National Internal Revenue Code (NIRC) is needed as inflation has lowered individuals’ purchasing power.
“These outdated tax base and tax-exemption thresholds undoubtedly decrease the net home pay of Filipino taxpayers, most significantly those of low-income taxpayers, thereby depriving them of decent living standards,” Ms. Manuel said.
“The correction of personal income tax brackets is long overdue and TMAP believes that something needs to be done immediately,” she added.
Thus, TMAP has backed the proposal to raise the tax exemption cap for bonuses to P70,000 from P30,000.
The House of Representatives on Tuesday approved on second reading House Bill 4970 which raises the tax exemption cap for bonuses. A counterpart measure at the Senate, meanwhile, is pending at the committee level.
The P500,000 top tax bracket likewise needs updating and should take into account the increase in consumer prices since 1997, TMAP said. Income tax rates of individuals should also be reduced to 20-30% from the current 32%, it added.
“This will promote equity in the tax system and make the Philippine workforce competitive with its ASEAN (Association of Southeast Asian Nations) neighbors,” Ms. Manuel said.
“It will also help bridge the gap in the taxation of Overseas Filipino Workers (OFWs) who are tax exempt, vis-à-vis those who choose to stay and work in the country,” she added.
Senator Juan Edgardo “Sonny” M. Angara, in Senate Bill No. 2149, proposed to lower individual income tax rates over a three-year period. The measure has been pending at the chamber’s committee of ways and means since March.
Under Mr. Angara’s proposal, those earning over P1 million will have a reduced income tax rate of 25% by 2017 from the current 32% under the NIRC.
At least three bills have been filed at the House of Representatives seeking to slash individual income tax rates. These are likewise all pending with that chamber’s Ways and Means committee.
Finally, the Tax Code should be reviewed and simplified to ease the compliance of self-employed individuals and marginal income earners, the TMAP noted.
“In general, TMAP welcomes a comprehensive review of the NIRC, as amended, to clarify certain provisions therein which have given rise to taxpayer issues due to radical changes in interpretation,” TMAP said.
Finance Secretary Cesar V. Purisima last month said tax reviews should involve the entire law and not be “piecemeal” in order to make the tax system “more equitable, more progressive, more competitive, but with an impact that’s revenue positive”. — Mikhail Franz E. Flores
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