MANILA, Philippines – If the next president is supportive of tax reform and manages to win the backing of other sectors in government, a genuine overhaul of the Philippines' 19-year-old taxation system is possible within a year or two of the new administration.
This was according to Mon Abrea, chief strategy officer of the Abrea Consulting Group, who said on a comprehensive fix of the tax system should include reforming the Bureau of Internal Revenue (BIR).
Abrea, an advocate of genuine tax reform and a former BIR examiner, scored the bureau for threatening taxpayers with penalties instead of helping them comply with the law and pay the right taxes.
"The taxpayers audited by the BIR are just being harassed, they're not being helped to pay the right taxes," he said in a presentation at the American Chamber of Commerce on Thursday, April 28.
"The BIR is knocking on [taxpayers'] doors, they don't know what to do, so they compromise. And this is happening all around the country," he added.
Abrea said this also gives BIR examiners more leverage, making the system prone to corruption.
While Abrea acknowledged that tax evasion remains a serious problem, especially among professionals, he said the BIR should make it easy for taxpayers who want to comply with the law by cutting down on bureaucratic processes and unnecessary documentary requirements.
'Overtaxed and underserved'
Aside from reforms in the BIR, Abrea said legislators should have a more thorough understanding of the taxation system and proposals to amend the tax code – one that goes beyond outright tax exemptions for low-income earners. (READ: Plans and promises: Presidential bets on taxation)
He also echoed other economists' calls for a review of the tax system that would lower the income tax rate and make it more competitive. (READ: Tax cuts as campaign promise? Overhaul tax system, economists say)
Among its ASEAN neighbors, the Philippines has the second highest personal income tax (32%) and highest corporate tax (30%) system.
"This is a continuing injustice that we have to put an end to already," Abrea said.
"Every time a taxpayer complains, there's a reason, and the government should listen. We are the ones funding the government, so it has to be collaborative in nature," he added.
Abrea also pointed out that the high taxes, coupled with poor government services, are being used as excuses by some not to pay the right taxes.
"We are overtaxed and underserved," he said.
Aside from rationalizing tax rates, Abrea said the government should work to broaden the taxpayer base and improve the tax compliance of self-employed individuals and professionals. – Rappler.com