FINANCE Secretary Benjamin E. Diokno said it is too early to make adjustments to recent tax reform laws, signaling his reluctance to back a House Bill seeking to provide tax relief for the poor and middle class.
“We just amended both personal income tax and corporate income tax. Let’s give the new tax system a chance to operate. Too early to tinker with it,” Mr. Diokno told reporters on Wednesday.
He was reacting to the proposed Tax Reform Act for the Masses and the Middle Class (TRAMM), which hopes to “correct” the previous government’s two major tax measures, the Tax Reform for Acceleration and Inclusion (TRAIN) law and the Corporate Recovery and Tax Incentives for Enterprises (CREATE) law.
ACT Teachers Representative France Castro filed the TRAMM bill to address the “imbalances brought by regressive tax reform laws such as TRAIN and CREATE that offer little benefit to poor and middle-class families.”
The TRAMM bill sets a 20% maximum personal income tax rate for individual citizens, with their first P400,000 exempt from tax.
It seeks exemptions for senior citizens and persons with disabilities and raises the cap for tax-free bonuses to P150,000.
If signed, TRAMM will require the Bureau of Internal Revenue to “set up a progressive, 10-bracket (in the minimum) personal income tax schedule.”
The TRAIN law was Package 1A of the tax reform program, while the CREATE law was Package 2 of the previous government’s Comprehensive Tax Reform Program.
Under TRAIN, individual taxpayers earning over P250,000 but not more than P8 million pay tax rates of 15-30% starting Jan. 1, 2023.
It also allows the self-employed and professionals earning P3 million or less to avail of an optional 8% tax in lieu of the graduated personal income tax and percentage tax.
It also exempts from income tax the first P250,000 earned by individual taxpayers, and reduced the Donor’s and Estate Taxes were reduced to a fixed rate of 6%.
The CREATE law, billed as a pandemic relief measure for businesses, reduced the corporate tax from 30% to 20% for small businesses with taxable income not exceeding P5 million and total assets excluding land not exceeding P100 million, and 25% for all other corporations, both domestic and foreign.
“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 overburdened Filipino working-class families. Reducing income tax rates for working families will not only improve their way of life, but also strengthen their purchasing power which will boost overall domestic demand for consumer goods,” Ms. Castro said in a statement on Tuesday.
Headline inflation hit 6.1% in June, the highest in nearly four years. This brought the first-half inflation average to 4.4%, above the central bank’s 2-4% target range. The year-to-date average is still lower than the official 5% forecast for the year. — Diego Gabriel C. Robles