Philippine Senator Francis “Chiz” Escudero on Tuesday, August 25 urged President Benigno Aquino III to send to Congress a proposed measure lowering personal income taxes by certifying it as urgent to hasten its passage.
Escudero said that the presidential certification will make the bill a priority measure and veto-proof.
“The reality is that the input here of the President is critical when it comes to tax measures. The lawmaking process stops at his desk. If he doesn’t like a bill, he won’t sign it. So if this is the reality, then it’s better to engage him positively,” Escudero said.
Escudero, who used to chair the Senate Committee on Finance, noted in the same vein that, historically, measures that presidents send to Congress are not always written in stone.
“Congress can fine-tune, improve and make it better. But, at the very least, legislators would know the sense of the Office of the President. It can serve as an input, and a major one at that,” Escudero said.
“More than the specifics of the bill, what’s important is the President’s message to Congress that ‘I want this measure passed,'” he said. “President Aquino should not let the opportunity pass to bring down one of the highest individual income tax rates in the Southeast Asian Region.”
“Years from now, when the President goes back to Times Street, he should not look back with regret that he squandered the opportunity to lower income taxes to compassionate levels,” Escudero said.
The Philippines’ 32 percent tax bite on a monthly income of $1,100 (P51,491 at P46.81 exchange) is one of the highest in the region. “And whatever is left in the pay envelope when spent is still subject to 12% VAT,” Escudero pointed out, elaborating further that he is in favor of lower rates, fewer brackets, simpler rules and faster process in personal income tax filing. “We should make it less complicated, less cumbersome.”
Escudero was the sponsor of a measure that exempts minimum wage earners in the private and public sectors from income tax, which later became Republic Act No. 9504. The law covers not only the basic pay, but also holiday pay, overtime pay, night shift differential and hazard pay received by minimum wage earners.
He also shot down proposals to increase the 12% VAT rate to recoup whatever foregone revenues that lower income taxes would cause.
“The VAT itself can capture the expenditure of a higher take-home pay. There is no need to increase the sales tax to offset any change in revenue collection resulting from the lowered personal income taxes,” he said. “It’s no longer relief if what is deducted is soon recovered by a higher VAT.”
The issue, he explained, is to adjust the tax rates to reflect the erosion in purchasing power caused by inflation, because the current one was arrived at 18 years ago, when prevailing average salaries were lower and the prices of goods were cheaper.