DOF eyes P11.76 B yearly from new income tax measure

The Department of Finance (DOF) expects to generate P11.76 billion yearly from a measure proposing to restructure the country’s income tax system.

In a position paper on House Bill 5257, a bill seeking to amend the newly passed Republic Act 9504 or the minimum wage law, the DOF said the proposed simplified net income taxation scheme (SNITS) would be good for the country but cautioned that it should have clear provisions on allowable deducations.

Antique Rep. Exequiel Javier filed the bill which proposes to limit the allowable business deductions from gross revenues to certain costs such as a reasonable allowance for salaries of officials and employees and a reasonable allowance for supplies, telecommunications, electricity, fuel, light and water.

The proposed limits also include interest paid or accrued on loans contracted within the taxable year, business taxes paid or incurred within the taxable year, depreciation of property; and contribution to the government or accredited relief organizations.

In his bill, Javier wants the revenues to be derived from the measure used to finance the rehabilitation of Region VI, which had been devastated by typhoon Frank. He also wants the revenues to finance the capital outlay for state universities and colleges.

However, the Finance department warned that the initial months or years of the tax reform may not result in the expected amount of revenues due to birth pains.

It also said the bill should include some refinements to check if over deductions are occurring.

“Possible refinements could include empowering the tax administrator to use benchmarks or trigger levels that would raise a red flag to the tax administrators that possible over-deductions are occurring,” Javier said.

The government is stepping-up measures to raise more revenues and effectively contain the budget deficit at P75 billion this year. The government hopes to balance the budget by 2010.