MANILA, Philippines – Ahead of ASEAN integration to be formalized this year, Senator Sonny Angara has warned that the country’s high tax rates may drive Filipino skilled workers to move to neighboring countries where taxes are lower.
“Ibig sabihin ng ASEAN Integration, ay halos magsasama-sama ang ating mga ekonomiya dito at magiging mas mahalaga itong usapin ng pagbubuwis. At kung ikukumpara nga natin ang Pilipinas kung saan ang kinikita mo ay ang lampas ng kita ng P500,000 ($10,729) kada taon, kapag lumampas ho doon ay 32% o halos 1/3 ang iyong ibabayad sa inyong kita,” Angara said in a radio interview with Atty. Joey Lina as part of “Sagot Ko ‘Yan” on DZMM on Sunday, October 25.
(ASEAN Integration means all the economies will get together so it’s important we talk about tax. If you look at the Philippines, if you earn more than P500,00 annually, you will be taxed 32% or almost 1/3 of your salary.)
He pointed out that, in Indonesia, the highest tax rate is 30%, Malaysia has 26%, and Singapore has 20%. Angara, however, said that that its not always a direct comparison. (READ: Why PH has second highest income tax in ASEAN)
In the Philippines, a person earning P250,00 to P500,000 ($5,364-$10,729) is taxed at 32% but in Singapore the equivalent bracket is only 2%, because that level of income is considered low in the developed nation, Angara explained.
Angara added that Thailand is the process of reforming its tax system in a bid to be more competitive. From 40% at the highest percentile, Thailand has slashed it to 30% and is looking at further reducing it to 25%.
“Sa Thailand po kasi nakikita ho nila na kailangan nilang maging competitive o alam ho nila na ‘pag dating ho ng araw, I think by next year ay iyong integrated na o magsama-sama na ho tayo,” he said.
(In Thailand, they see the need to be more competitive as integration happens next year.)
This, he said, may lead to countries like Thailand poaching creative talent nurtured in the Philippines.
“Kunwari gusto na ng Pilipino na magtrabaho sa Thailand o gusto ng taga-Thailand na magtrabaho sa Pilipinas ay pwede ho iyon. Pero ang gusto ho nila maakit ho nila iyong magagaling na empleyado at isang paraan ho diyan para maaakit iyong mga magagaling na indibidwal, katulad ng mga manunulat o kaya mga creative people ay sa paraan ng mas mababang buwis. Kaya nakikita nila na mobile po yung tinatawag na labor capital. Iyong nag-iinvest at saka kumikitang tao ay naghahanap ng pinakapabor sa kanya na lugar para magtrabaho.”
(Integration will mean that a Filipino can work in Thailand and vice versa. But what these countries want are good, skilled workers and one way to lure these talented individuals, such as writers or other creative people, is lower taxes. They see that there will be a mobile labor force. The people you invest in and earn from will look for more favorable places to work.)
Angara, chairman of the Senate ways and means committee, is the leading proponent of a bill seeking to lower income tax rates.
He also reiterated the need for taxes to be adjusted for inflation, a process known as indexation, as the current brackets have not been adjusted since 1997. (READ: Big business group to Aquino: Reform taxes)
Angara also pointed out that the country has the highest Value Added Tax (VAT) in the region at 12% while the rest don’t exceed 10%.
He added that he doesn’t agree with the Department of Finance’s suggestion (DOF) to raise the VAT so as to compensate for the loss of government revenue by lowering income tax as it puts a heavy burden on the people who can least afford it.
“Pagdating naman ho sa VAT, mas malaki po ang porsyento ng ating populasyon dahil kahit ika’y kumikita ho ng minimum wage, ika’y magbabayad parin ho ng VAT sa binibili. Sa Mercury Drug, … fast food, sa mga restaurants, pag bumiyahe po tayo may VAT ho yun kaya hindi tayo sangayon na dapat taasan yung Value Added Tax na 12%.”
(When you talk about VAT, it affects a bigger percentage of the population because even if you are earning minimum wage [and thus exempted from income tax] you will still pay the VAT – at Mercury Drug, fast foods, when commuting we pay VAT – so I don’t agree that we need to raise the 12% VAT any higher.)
The finance department submitted to Congress in August the government’s version of a tax reform bill, which includes an all-in income tax exemption to all wage earners with an annual income of less than P1 million ($21,458).
Along with the proposal is increasing VAT from 12% to 14% and expanding the VAT base by removing all exemptions, except in agriculture, health, banks, education, as well as removing zero-rating, except direct exports.
Angara also dismissed the Aquino administrations suggestions that a projected P30 billion ($643.7 million) loss in government revenue if income tax is lowered would lead to lower credit ratings citing that this amount is less than 1% of the government budget for 2016. – Rappler.com
$1 = P 46.60