Electronic tax

Benjamin Diokno cold to more tax cuts under “TRAMM” proposal

Benjamin Diokno cold to more tax cuts under "TRAM" proposal

Benjamin Diokno

MANILA, Philippines — The president’s economic director and chief tax collector Ferdinand Marcos Jr. is cold to a party group’s proposal to further cut income taxes.

“We have just changed both the personal income tax and corporate income tax systems. Let’s give the new tax systems a chance to work. Too early to tinker,” Finance Secretary Benjamin Diokno said on Wednesday (July 13).

Diokno was referring to the Tax Reform for Acceleration and Inclusion Act (TRAIN), which came into force in 2018, and the Business Recovery and Tax Incentives for Businesses Act (CREATE), which lowered corporate tax rates retroactively to July 2020 as a form of relief from the impact of the COVID-19 pandemic.

The ACT Teachers party group had tabled a bill titled “Tax Reform for the Masses and the Middle Class (TRAMM) Act” which, according to France Castro, sought to “correct the imbalances brought about by regressive tax reform laws such as TRAIN and CREATE which offer little benefit to poor and middle class families.

“The rising prices and out-of-control inflation rates of recent years further justify the need for a tax reform package that would reduce income tax rates for overburdened Filipino working-class families,” Castro said in a statement last Tuesday (July 12). .

“Reducing income tax rates for working families will not only improve their way of life, but also strengthen their purchasing power, which will boost overall domestic demand for consumer goods,” Castro added.

She listed the features of the bill:

  • Maximum personal income tax rate of 20% for individuals
  • Tax exemption for the first P400,000 of their income
  • Return of additional exemptions for dependents with elderly and disabled to qualify as dependents
  • Increase tax-free bonus cap to P150,000
  • Mandate the Bureau of Internal Revenue (BIR) to implement a progressive personal income tax schedule with 10 brackets (minimum)

“Our country remains among the most unequal in the world with income shares of the poorest and wealthiest segments of the population stagnating almost for decades and now personal income tax rates for poor citizens and middle class in the Philippines are even higher than rates in other countries like Singapore,” Castro said.

“Other countries also have additional personal allowances and/or tax exemptions for dependents, unlike the Philippines,” Castro added.

Diokno had also been cold to the three-year postponement of planned personal income tax breaks under TRAIN and new or higher taxes proposed by the Duterte administration to pay record debts and close the budget deficit.

Diokno last week said the Marcos administration plans to levy 12% value-added tax (VAT) on digital transactions, impose a tax on single-use plastics, and follow through on the other two. packages – property assessment and capital market taxation – left behind. by the Duterte administration.

While these two pending tax reform packages were both revenue neutral or would neither increase nor decrease tax revenue, they would simplify tax systems for real estate as well as passive income and finance taxes. .

Last month, Diokno said the Marcos administration would first implement the “much better” tax system put in place by reforms under former President Rodrigo Duterte.

“There is room for better tax collection through digitalization,” the finance chief had said, citing a plan to introduce further reforms at the Bureau of Customs (BOC) to shore up revenue from the second-largest the country’s largest tax agency, long mourned for also being among the most corrupt government agencies.

For Diokno, the current tax system is not yet perfect but can still be improved. “We will implement the new tax system and improve it later,” he said.

TSB

RELATED STORIES:

Tax reforms for a 20% income tax rate cap, the exemption of the first income of 400,000 pesos is pushed

New finance chief Ben Diokno is not in favor of tax hikes to fight debt

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