By Pexcel John Bacon
THE Department of Finance (DoF) defended its proposed personal income tax adjustments after lawmakers questioned whether the measure would give higher-income earners the same tax relief as lower-income taxpayers.
During a House of Representatives Ways and Means Committee hearing, Misamis Oriental Rep. Jennifer “Karen” A. Lagbas questioned the proposed tax schedule, particularly the reduction in the base tax for people earning P800,000 to P2 million to P85,000 from P102,500 while the 25% tax on income exceeding P800,000 remains unchanged.
Finance Undersecretary Karlo Fermin S. Adriano said the proposed schedule was designed so that each higher income bracket begins with the maximum tax payable under the preceding bracket, preventing taxpayers who earn more from paying less than those in lower brackets.
He said the proposed increase in the tax-exempt threshold to P350,000 would lower the maximum tax due for lower-income brackets, which would in turn reduce the base tax imposed on succeeding brackets.
“The next brackets cannot have a lower tax due than the lower bracket,” he said, noting that the proposed P85,000 base tax for those earning P800,000 to P2 million was derived from the maximum tax payable by taxpayers in the P450,000 to P800,000 income bracket.
Mr. Adriano said higher-income earners would also benefit, but maximum tax savings would be capped at P17,500 across income brackets.
The DoF plans to offset the revenue impact through proposed wealth taxes, including a 75% excise tax on automobiles worth more than P8 million, higher taxes on nonessential goods and a 15% global minimum tax on large multinational enterprises. It also proposed raising the tax on nonessential goods to 25% and expanding coverage to private aircraft and sea vessels for private use.
Meanwhile, Party-list Rep. Elijah “Eli” R. San Fernando questioned the proposed P150-per-kilo excise tax on single-use plastics, saying it could disproportionately affect low-income consumers who rely on sachets because they cannot afford to buy products in bulk.
The Finance department said the proposed tax package should be viewed as a whole, with savings from personal income tax relief outweighing the impact of higher excise taxes.
It estimated that the measure would raise the cost of a plastic “labo” bag by 53 centavos per piece, a “sando” bag by 61 centavos and sachets by 18 centavos.
Mr. San Fernando supported raising the income tax exemption but proposed increasing the threshold further to P600,000. The DoF said such an increase could result in revenue losses of P177 billion to more than P250 billion, depending on the proposal.
Mr. San Fernando also asked whether the government could recover foregone revenues by addressing leakages at the Bureau of Customs and boosting efforts against illicit trade and corruption instead of raising excise taxes.
The DoF said it supports efforts to curb corruption and improve tax administration through digitalization but maintained that higher excise taxes on tobacco and sweetened beverages are needed to discourage consumption with harmful health and environmental effects.