Bayan Muna Party-list Rep. Neri Colmenares on Wednesday appealed to Pres. Benigno Simeon Aquino III to certify as urgent House Bill 5401 or the Personal Income Tax Reform bill that would effectively slash the income taxes of the middle class.
Since 1986 the tax bases remain substantially unchanged. Meanwhile, based on the 1986 to 2014 Consumer Price Index published by the NSO, national consumer prices have increased by 539.53% since 1986. Thus, the Php500,000 top tax base, if adjusted to its present value, is now equivalent to Php2.697 million, said Senior Deputy Minority Leader Colmenares.
With the current income tax brackets and tax rates, he said the Philippines effectively imposes the highest personal income tax in the entire Association of Southeast Asian Nations (ASEAN) region.
Based on a study presented by the Tax Management Association of the Philippines (TMAP) reveals that a Filipino individual earning Php500,000 annually is taxed at 32%.
According to Colmenares, ASEAN neighbors with equivalent income are taxed at the following rates: Vietnam – 20%; Cambodia – 20%;Laos – 12%; Malaysia – 11%;Thailand- 10%; Singapore – 2%; and Brunei – tax free.
Against such a backdrop, a great majority of Filipinos would have to content themselves with meager salaries. Official data from the National Wages Productivity Commission show that as of January 2015, the daily minimum wage rate in Metro Manila, the highest nationwide, is at Php466 per day, while the lowest is at Php213 received by agricultural and non-agricultural workers in the Ilocos region. These translate to an annual income of about Php123,000 for minimum wage earners in Metro Manila and about Php56,232 for the Ilocos region, said the progressive solon.
The veteran solon said while a minimum wage earner is tax-exempt, such dismal levels of income are still way below the Family Living Wage or the minimum amount needed by a family of six members to meet its daily food and non-food needs, plus a 10 percent allocation for savings.
As of August 2014, Family Living Wage is at Php1,086 daily (Php396,390 annually) as shown by independent think-tank Ibon Foundation estimates. Compounding such situation is the prevailing tax system whereby getting additional income no matter how small in excess of the minimum wage, the whole income now becomes taxable, Colmenares pointed out..
Noon pa dapat binaba ang income tax. In fact the clamor to approve the law that lowers income tax is now snowballing not only among the ranks of taxpayers themselves but even among tax managers and practitioners like the TMAP. In fact, even the tax collecting agencies– the Department of Finance and the Bureau of Internal Revenue — recognize the need for such tax adjustments, he added
House Bill 5401 seeks to: (1) Exempt income of families earning below Php396,000 per year to preserve the monthly living wage of Php33,000 from income taxation; (2) Restructure and simplify the income brackets and their corresponding tax rates; (3) Reduce and align the maximum tax rate with that of corporate taxpayers (from 32% to 30%); (4) Adjust the top tax base — from Php500,000 to Php2,700,00 — to reflect adjustments in the Consumer Price Index (1986-2014) with Php500,000 taxed only about 10%; (5) Establish an automatic adjustment/indexation mechanism (interval of 3 years); and (6) Align the Optional Standard Deduction (OSD) base for individuals with the OSD base for corporations. (PNA)