By Jenina P. Ibañez, Senior Reporter
THE NEXT ADMINISTRATION should make more consistent taxation rules for local government units (LGUs) to address complications arising from the varying rates implemented by each unit, analysts said.
Eleanor Lucas Roque, P&A GrantThornton tax advisory and compliance principal, included such changes to the organization’s list of priorities for the next administration.
“Reforms in the local government taxation particularly in the deadline for filing and payment and uniformity in rules for computing the taxable receipts (are needed),” she said in an e-mail.
Similarly, Tax Management Association of the Philippines President Fulvio D. Dawilan said local government units need to adopt nationally consistent standards and practices.
“The rule now is that each local government unit exercises the power to create its own sources of revenue. And that power is exercised by the respective Sanggunian of each LGU through the enactment of ordinances. That’s not a problem,” he said in an e-mail.
But each LGU imposes different tax rates.
“Because of the different rate, taxpayers tend to hop among LGUs giving the best rate. Similarly, the covered taxable transactions/subjects differ from LGU to LGU,” Mr. Dawilan said.
“LGUs also often quarrel as to which LGU has the jurisdiction to impose tax. And taxpayers are often confused as to which LGU it should be paying its local taxes.”
There should be uniform registration and administrative processes among LGUs, he said.
Meanwhile, Ms. Roque said that the country’s next leaders should push for the Duterte administration’s fourth tax reform package.
The fourth package is the Passive Income and Financial Intermediary Taxation Act, which aims to simplify the taxation of passive income.
“This last package under the comprehensive tax reform program will reduce the number of differing tax rates from 80 to 36 and harmonize the tax rates on interest, dividends and capital gains, and the business taxes imposed on financial intermediaries,” the Department of Finance had said.
The current Congress is unlikely to pass the fourth tax reform package, as lawmakers are on election break. While the House of Representatives has approved its version of the bill, it remains pending at the committee level of the Senate.
The Duterte administration’s tax reform programs reduced personal income tax, and provided estate tax and delinquency amnesty.
President Rodrigo R. Duterte signed into law the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, which reduced corporate income tax and rationalized the incentives system.
A third tax package, which would reform the country’s real property valuation, is also pending at the committee level in the Senate.
To compare, the Aquino administration was known for reforms such as increasing excise taxes on alcohol and tobacco to fund universal healthcare. During President Benigno S.C. Aquino III’s term, Congress passed a law that established a monitoring scheme for tax incentives.
Under President Gloria Macapagal-Arroyo, the government exempted minimum wage earners from paying income tax. She also signed the expanded value-added tax (VAT) law, which lifted previous VAT exemptions on petroleum and electricity.
Raymond A. Abrea, a certified public accountant and the president of the Abrea Consulting Group, suggested that the next government broaden its taxpayer base and address tax evasion.
Solutions include mandatory taxpayer identification number (TIN) registration for those earning income and engaging in business or even those opening bank accounts and applying for passports.
To address tax evasion, he said in an e-mail that there should be a mandatory audit for all government contractors and suppliers, along with large companies, political parties, and campaign donors.
Mr. Abrea also pushed for a wealth tax. House Bill No. 10253 or the proposed Super-Rich Tax Act of 2021 seeks to impose a tax of 1-3% for wealth starting at P1 billion and beyond.
Under the bill filed by a minority bloc at the House of Representatives, the tax would be used to fund medical assistance, education, employment, social protection and housing for the poor.
To encourage business activity, Mr. Abrea said the next government should exempt startups from paying taxes.
“Similar to Singapore and other developing countries, tax exemption is given as an incentive to encourage and support startups, especially tech business,” he said.
“They are given exemption on their first $100,000 income or first two years whichever comes first. So even if you’re not yet profitable, after two years, startups will start paying taxes.”