P-Noy scolds allies for pressing income tax cut

MANILA, Philippines – President Aquino has scolded some of his close allies in the House of Representatives for pushing for the passage of a bill that aims to reduce income taxes, despite strong opposition from the Department of Finance (DOF).

Sources told The STAR that Aquino sent a stinging text message to some lawmakers who have been vocal in pushing for the income tax reform bill that the DOF and the Bureau of Internal Revenue (BIR) have warned would lead to P30 billion in annual revenue losses.

“We’ll lie low for awhile, there might be repercussions that will affect my constituents,” said one author of the bill when sought for comment on Malacañang’s latest pronouncement that it would support the reduction of corporate and personal income taxes if Congress would scrap restrictive bank secrecy laws.

Earlier, Speaker Feliciano Belmonte Jr. and Marikina City Rep. Romero Quimbo said the House would press for the passage of the bill and continue to seek Aquino’s backing for it.

Quimbo appealed for the convening of the Legislative-Executive Development Advisory Council (LEDAC) for a dialogue on the bill.

Malacañang earlier said it would agree to support the measure if Congress raises the value-added tax to 14 percent, a condition immediately rejected by lawmakers and received with massive condemnation by the public.

The measure is expected to greatly ease the burden on fixed-income earners, who have to make do with low take-home pay.

Proponents of the measure said that under the current tax setup, ordinary wage earners pay almost the same taxes as more affluent businessmen as the tax brackets used as reference have remained unchanged since 1997.

Valenzuela City Rep. Sherwin Gatchalian, one of the staunch backers of the measure, said Malacañang appears to be “dribbling” the issue so that Congress runs out of time to pass the bill.

He said Malacañang’s setting conditions meant it was not really sincere in dealing with Congress and in addressing the plight of salaried workers.

“What’s the Bank Secrecy Law got to do with reducing income tax? The lifting (bank secrecy) can drive away investors. It’s really unfortunate that the welfare of our workers is left hanging and used as a negotiating tool,” Gatchalian said.

Pasig City Rep. Roman Romulo, author of the bill reducing personal income tax rates only, said he would take on Malacañang’s dare and work for the passage of lifting bank secrecy.

Transparency first

In a roundtable discussion with The STAR editors and reporters yesterday, BIR Commissioner Kim Jacinto-Henares said middle-income earners should support government transparency efforts like easing bank secrecy and amending the anti-money laundering law.

“We need to have transparency and one way of doing that is to lift bank secrecy. The middle income earner has nothing to fear if he or she doesn’t hide anything, if everything is accounted for,” Henares said.

She rejected claims by authors and backers of the measure on lower income tax that ordinary wage earners are taxed just as much as businessmen. She said such argument fails to consider other taxes entrepreneurs pay.

“That is why we have been actively pushing for the inclusion of final taxes in the income tax return because right now, we do not really have an idea of how much these people really earn,” she explained.

“We tried it before, remember? But a lot of people complained so what can we do?” Henares added.

The BIR chief was referring to the Annual Income Return (AIR) requirement, designed to capture the final taxes paid by individuals for earnings from one-time transactions such as prizes and winnings, sales of shares of stocks, bank deposits and real estate properties.

The AIR, which was supposed to be implemented for taxable year 2012, was made optional by the BIR after drawing flak from various sectors, including Congress. Henares said there are no plans yet to revive AIR anytime soon.

For his part, Finance Secretary Cesar Purisima maintained the Aquino administration’s thrust is toward “equitable, progressive and competitive” tax reform and not just “piecemeal” changes. –Paolo Romero and Prinz Magtulis (The Philippine Star)