Government nixes piecemeal tax changes

MANILA, Philippines - Tax reforms should be comprehensive, not piecemeal.

The Aquino administration has reiterated its stand against the lowering of tax rates for fixed-income earners and companies, saying piecemeal legislation is not the key to attaining first-world status for the Philippines in the future.

“The government believes that instead of piecemeal changes in the tax rates, a holistic tax reform program is needed to ensure the continued implementation of essential programs on social protection, poverty alleviation, employment generation, educational competitiveness, housing, universal health care, as well as for public infrastructure and national defense and security,” Press Secretary Herminio Coloma Jr. recently said.

Tax rates for workers in the country are indisputably the highest in Southeast Asia.

“Holistic tax reform and accelerated infrastructure development are vital components of the government’s program for sustaining a high growth trajectory that will enable the Philippines to join the ranks of high income countries,” Coloma said.

“Sound management of macro-economic fundamentals anchored upon good governance has been the key to the attainment by the Philippines of relatively high gross domestic product growth rates for the past five years,” he added.

“Hence, the President is urging our Bosses to support the continuity of daang matuwid.”

Finance Secretary Cesar Purisima has described as “populist” current tax rates being pushed by administration lawmakers in the Senate and the House of Representatives now pending in the ways and means committee of both chambers.

The Department of Finance chief suggested that tax reforms should be comprehensive and not piecemeal, saying lawmakers’ push to lower tax brackets – the highest in Southeast Asia - are nothing but “populist policies.”

Purisima reiterated his stand regarding a “holistic” approach to reform the existing tax system, which puts salaried employees to a disadvantage, having their taxes withheld even before they receive their monthly salaries.

“We are open to a holistic reform which will include an adjustment of the rates and brackets – doing otherwise is not the fiscally responsible way since it can hurt our people in the long run if we go down the slippery slope of populist policies,” he said.

Administration lawmakers – both the ways and means committee of the Senate and the House of Representatives – have been pushing for the lowering of personal income taxes, saying that tax bracket systems have been stuck at 1997 levels – for 18 long years.

Aquino earlier rejected outright proposals to lower the high personal and corporate income taxes, saying it would lead to more budget deficits, not to mention huge losses, to the tune of P29 billion yearly, in government coffers.

Coloma said the current set-up, where government withholds 30 percent of fixed-income earners monthly salaries, would have to continue until June 2016 when Aquino steps down from office.

“The President prefers to stay the course for the remainder of his term in order to preserve and consolidate the gains achieved through sound management of macroeconomic fundamentals,” the spokesman told Palace reporters.

Coloma issued the statement when asked if the administration is willing to heed the advise of the Joint Foreign Chambers for Aquino to reconsider his stand against giving private and public workers tax relief.

JFC stated that contrary to Aquino’s belief, lowering the country’s current policy on individual and corporate income taxes – the highest in Southeast Asia – would not lead to any budget deficit but will even spur investments and commerce.