Finance Secretary Turns Down Tax Cuts Proposal for Lower- and Middle-class Workers

Over the past week, ACT Teachers’ party-list Rep. Francisca Castro filed a bill to lower the income taxes. The bill was titled the “Tax Reform Act for the Masses and the Middle Class.” According to Castro, previous laws such as the Tax Reform for Acceleration and Inclusion Law (TRAIN) and the Corporate Recovery and Tax Incentives for Enterprises (CREATE) create imbalances that are not necessarily favorable for lower- and middle-class families.

“Rising prices and untamed inflation rates in the past few years all the more justify the need for a tax reform package that would reduce the income tax rates of the overburdened Filipino working-class families,” Castro elaborated, noting that the bill will help to strengthen the purchasing power of the working class.

Under the bill, the maximum personal income tax rate for individual citizens will be 20%. Additionally, it suggests that the first ₱400,000 in earnings be exempted. The bill also calls for the return of additional exemptions for dependents as well as raising the cap on tax-free bonuses to ₱150,000. Finally, it will direct the Bureau of Internal Revenue (BIR) to establish a progressive, 10-bracket personal income tax (PIT) schedule.

Castro furthered that PIT rates in the Philippines have risen higher compared to other countries such as Singapore, particularly for the lower and middle classes. Hence, the income disparity between the population’s richest and poorest continue to be maintained. “Other countries also have additional personal allowances and/or tax exemptions for dependents, unlike here in the Philippines,” Castro added.

In response to the filing of the bill, however, Finance Secretary Benjamin Diokno rejected the proposal of Castro. “We just amended both PIT (personal income tax) and CIT (corporate income tax). Let’s give the new tax system a chance to operate,” he explained. The TRAIN Law came into effect in 2018. This measure exempts individuals earning ₱250,000 or less per year from paying personal income taxes. Meanwhile, last year’s CREATE Law cut corporate income tax rates for large firms and MSMEs to 25% and 20%, respectively. Given these fairly new tax cuts, Diokno added that it is still “too early to tinker with it.”

Source: Manila Times