PCCI blasts House measures amending income tax scheme

Published by rudy Date posted on March 23, 2011

A business group said yesterday two House bills seeking to rationalize the income tax system have provisions that are biased against individual businessmen or professionals.

The Philippine Chamber of Commerce and Industry (PCCI), the largest business organization in the country, expressed concern over the differences in the treatment of taxes for corporate entities and sole proprietors in House Bill Nos. 3927 and 3992, the twin measures being pushed in the House of Representatives to simplify income taxation of corporations and individual taxpayers.

In a position paper submitted by PCCI to the House committee on ways and means, the PCCI stated that the proposals are unfair or biased against individual businessmen or professionals.

In the bills, a corporation can claim bigger direct cost yet avail of a lower income tax rate of 18 percent while an individual taxpayer is allowed limited deductions, with tax rate as high as 32 percent.

Tammy Lipana, chairman of the tax committee of PCCI, said under the proposed schemes, if a corporation does not opt for the 18 percent gross income tax, it shall be allowed to claim practically all its business-related expenses and other deductions allowed in determining its taxable income, whereas if a self-employed individual does not opt for the 40 percent Optional Standard Deduction, he will be allowed to claim only eight items of deductions.

Lipana said this would result in a higher income tax due for an individual compared to that for a corporation.

PCCI’s Francis Chua affirmed that PCCI recommends the adoption of a tax system that is neutral to business in whatever form, whether it be in corporate form or as sole proprietorship.

“A tax system should not cause a distortion in the decisions of businessmen by encouraging businesses to incorporate,” he added.

“The tax system for both corporations and individual taxpayers should be aligned so as to encourage more micro, small and medium entrepreneurs,” Lipana said.  –Ayen Infante, Daily Tribune

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