Speaking before members of the European Chamber of Commerce of the Philippines (ECCP) at Makati Shangri-La Hotel yesterday, Angara said the “executive department is asking us to slow down on lowering of taxes.”

This was after a bill authored by Angara that raised the tax exemption ceiling for 13th month pay to P82,000 from P30,000 was signed into law last month.

“Realistically speaking, we want to lower the tax rates, that’s the long-term goal, but we are not too sure if this would happen before the elections,” Angara said.

He did not elaborate, but the highest tax bracket in the Philippines of 32 percent applies to those earning P500,000 and above, which is not even taxed in Singapore.

Angara also assured ECCP members the incentives given to enterprises would not be decreased and could in fact be increased, saying “incentives are necessary” to cover for the higher cost of doing business in the Philippines, including the cost of corruption.

Angara said Senate has rejected a version of the Tax Incentives Management Transparency Act (TIMTA) that would appropriate incentives in the General Appropriations Act, as this would add another layer of approval.

Instead, the TIMTA would just be an addendum for monitoring the amount of incentives given to enterprises.

Angara said tax collection in the Philippines has been severely wanting. The tax effort steadily declined from 17 percent of gross domestic product in 1997 to 12.8 percent in 2009. It has since slowly bounced back, reaching 13.3 percent in 2013, but this was still lower than the Asean average of 15.8 percent.

He noted self-employed professionals, which include doctors, accountants and lawyers, reportedly have a combined annual income of P500 billion, yet only P11.3 billion was collected from them in 2013.

“Not only are we collecting little compared to our neighbors, we’re also administering our taxes inefficiently,” he told ECCP members.

Citing the 2015 Paying Taxes report of the World Bank and PriceWaterhouseCoopers, Angara said Filipinos have to spend 193 hours for one to comply with his respective tax obligations.

This is faster than the Asia-Pacific average of 229 hours, but still slower than the 173 in Cambodia, 155 in Myanmar, 133 in Malaysia, 93 in Brunei Darussalam and only 82 in Singapore.

Angara said the same report found that a Filipino would need to make 36 payments to fully comply, compared to 32 for his Vietnamese counterpart, 31 for one in Myanmar, 27 for Brunei, 22 for Thailand, 13 for Malaysia and five for Singapore.

He added smuggling is a big drain in government, citing a 2014 Global Financial Integrity report that stated the Philippine government lost up to $23 billion since 1990 in customs revenue due to trade misinvoicing or misdeclaration or technical smuggling.

“Such could have been used to improve more classrooms, equip more hospitals and build better roads,” Angara said.

He is still pushing for a Customs Modernization and Tariffs Act, meant to comply with the Revised Kyoto Convention on the simplification and harmonization of customs procedures.

Angara noted fiscal incentives add up to sizable tax expenditures and eventually contribute to higher revenue foregone, which the Department of Finance estimated to be P144 billion in 2011. This was a little more than 10 percent of government’s total revenues for that year.

Source: Malaya Business Insight