MANILA, Philippines – With only 12 days before the May 9 election, a tax expert reminded candidates, especially the presidential aspirants that real tax reform requires restructuring of regulations and culture and not simply cutting taxes.
"Cutting taxes is one part of reform, we need to have efficient collection and eliminate bureaucracy in [the] BIR (Bureau of Internal Revenue),"said tax expert and Abrea Consulting Group Chief Strategy Officer Mon Abrea in a press briefing on Thursday, April 28.
As of 2015, the Philippines has a population of 102.4 million with more than half are cited to be employed. But as of data collated from the BIR, there are only 13 million registered employees and 300,000 professionals as of July 2015.
The discrepancy continues as latest data from Philhealth and Social Security System (SSS) show there are 26 million and 32 million registered respectively on each agency.
"The inefficient government services give people the convenient excuse not to pay for taxes. We need proper regulation to encourage people to register and pay. Our tax base is too narrow," Abrea said.
The country’s tax rate, one of the highest in Southeast Asia, is coupled by the high compliance cost here as factors for the low number of taxpayers.
"Most people would want to pay taxes properly but are overwhelmed with regulations they don’t understand. We need a (tax) commissioner who will rationalize the law and end the bureaucracy in BIR, so when people ask for help they will not be harassed and end up compromising," Abrea added.
Presidentiables’ tax reform plans
Of all the presidentiables, Abrea believes only Senator Grace Poe and Senator Miriam Santiago seem to show interest with the tax reform, but still, their proposals are “not the clear picture of it.”
Management Association of the Philippines (TMAP) sent a questionnaire to all presidential and vice-presidential candidates that discuss tax reform, and as of press time, only Poe has returned her accomplished form.
According to the questionnaire, Poe vowed to create a Tax Reform Commission within 100 days in office if ever elected. The said agency “will draft a comprehensive tax reform program,” Inquirer.net reported. Poe is also open to decreasing corporate and income tax by 25%.
For Santiago, she has previously mentioned on October 2015, that tax reform will also be her priority and income tax will be cut within her first six months in office.
Vice President Jejomar Binay has previously vowed to also eradicate income tax for all employees earning P30,000 (P640.06) or less.
In an interview, Duterte said he would need money to raise the salary of government workers, thus tax cuts would not have such possibility under his presidency. Meanwhile, Roxas has repeatedly stressed that “tax reform should not be discussed during the campaign season.”
Still Abrea, a member of TMAP said there is much to be done in the taxation system of the country. Thus, he cited the following as the main agenda for reform:
Restructure of personal income tax and corporate income tax systems
Improve tax compliance of self-employed individuals and professionals
Broaden value added tax base
Consider indexing the excise tax on petroleum products
Enact fiscal incentive reform bill
Such overhaul may be possible in one to two years if all government agencies and local government units will cooperate, as lowering taxes is only a start of the reform.
“Corruption reeks in BIR and if possible, it has to be overhauled. I’ve worked there before, and I see the wrong practices being done every day,” Abrea said.
“More than lowering taxes, a culture of honesty must be instilled so people will trust the government again. Not everyone has access to lawyers who they can consult to pay proper taxes,” he stressed.
Elyssa Christine Lopez is entrepreneur.com.ph's editorial assistant/staff writer. Follow her on Twitter @elyssalopz.