BIR open to proposing lower income tax rates

Posted at 03/06/14 4:10 PM

MANILA (UPDATE) – Bureau of Internal Revenue (BIR) Commissioner Kim Henares said she is considering drafting a proposal to lower the country's income tax rates by next year.

She admits, however, this will need serious study.

"Next year, ako na ho mismo ang magbibigay ng proposal kung papaano ira-rationalize 'yung bracketing ng income tax para bumaba. Pero syempre, pagbaba nu’n, kailangan ng masusing pag-aaral," she said.

Henares noted that the BIR is still addressing loopholes before proposals to lower income tax rates are drafted, adding that lowering taxes should be approached “wholistically.”

“This year, we’re not in favor of doing anything about lowering tax rate. What we’re concentrating on is plugging the loopholes and rationalizing things, for example, the fiscal incentive rationalization, the Tax Information Management Transparency Act, revenue sharing, and Customs modernization. After we have done this, and I’ve said this long ago, if most of us pay the right taxes, we really can start thinking about lowering rates,” she told ANC on Thursday.

The reduction may also not be as drastic as Senator Sonny Angara is floating.

Angara said he is for lowering the top income tax rate from 32 percent to 25 percent and adjusting lower tax brackets.

Income tax rates currently range from 32 percent for employees earning at least P500,000 per year to 5 percent for those earning at least P10,000 per year.

Former Budget Secretary Benjamin Diokno said he agrees that income tax rates should be lowered to “harmonize” the country’s tax systems with its ASEAN neighbors.

However, he noted that “reform has to be accompanied by higher consumption tax (VAT).”

“Consumption is what you take from society. There are some people who don’t work at all, but they consume a lot. These people should also be taxed a lot. Income on the other hand is what you contribute to society. I think we should lower income tax because right now the government takes away one-third of your income,” he told ANC.

Diokno also said lowering income tax has been long overdue. -- With a report from Coco Alcuaz, ANC