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The Bureau of Internal Revenue (BIR) is expecting to lose P55 billion and even more annually if the income tax (IT) rates for individual and corporation are reduced to a uniform schedule of 25 percent from the current 32 percent.
Officials who are directly into tax collection job made the estimate as the incoming Duterte administration pledged to cut down the IT rate by seven percent.
BIR Commissioner Kim S. Jacinto-Henares cautioned the incoming fiscal officials to be more careful in adjusting tax rates as it might result in fund shortages slowing down the government’s economic and social programs.
Records showed IT is the single biggest source of collection of the bureau, constituting P784 billion, or 60 percent of the P1.3 trillion collection in 2014.
According to revenue officials If Congress finally approves the seven percent IT cut, the R784 million take would be reduced roughly by P55 billion annually and even much higher.
Lawyer Paula Alvarez, spokesperson of the incoming Finance Secretary Carlos Dominguez told DZMM radio that losses could be neutralize from other sources like increasing the excise tax rates on non-essential or luxury items such as cars, jewelry, private air and water crafts.
She also mentioned enhancement of voluntary tax compliance to raise more funds.
She stressed the need to readjust the rates to reasonable level as the P500,000 annual income subject to the maximum rate of 32 percent has become irrelevant it was fixed before the Second World War.
Other revenue officials said the tax cut could also hike the value-added tax (VAT) collection as consumers use the extra tax savings to buy more goods and services.
The fiscal authorities of the Duterte administration has not yet decided whether to increase or lower the VAT, saying they are still reviewing the entire business tax system. (JUN RAMIREZ)