PHILIPPINE REAL ESTATE and RELATED NEWS in and around the country . . .
.
.

Tax relief measure could hit self-employed, professionals

Vol. XXI, No. 192 [ Business World Online ]
Thursday, May 1, 2008 | MANILA, PHILIPPINES

A TAX RELIEF BILL for workers should impose higher taxes on self-employed individuals and professionals to offset revenue losses, the Department of Finance yesterday insisted, as lawmakers prepared to bring the proposal to the floor of the House of Representatives.

The bill, approved by the House ways and means committee, includes the Simplified Net Income Taxation System (SNITS) for self-employed individuals and professionals but Finance officials want deductions limited further.

A senator, however, said the "rider" might kill the bill altogether when it reaches the Senate.

Finance’s SNITS proposal will result in additional revenues of P14 billion, more than enough to cover an expected P12.4-billion loss from higher exemptions for fixed-income or salaried workers, said Finance department director Ma. Lourdes D. Recente.

House Bill 3971, which consolidated 20 bills filed by 26 lawmakers, will increase the portion of annual earnings exempt from income tax, therefore reducing taxable income and augmenting take-home pay.

The bill proposes to increase the personal tax exemption to a uniform P50,000. Personal exemptions vary under the current Tax Code: P20,000 for single individuals, P25,000 for the head of the family, and P32,000 for married individuals.

"An increase in tax relief is very timely amid the rising costs of basic commodities, especially food and fuel," said Antique Representative Exequiel B. Javier, chairman of the House ways and means committee.

"Giving the people more purchasing power will likewise stimulate the economy because it would translate to more indirect taxes for the government in the forms of expanded value added taxes imposed on all commodities purchased."

Aside from the increased tax exemption, the bill also hikes the additional exemption for dependents not exceeding four to P25,000 each from P8,000.

The tax measure also spares workers from withholding taxes every pay day if total gross annual compensation income does not exceed total personal and additional exemptions.

Mr. Javier said congressmen were in favor of the SNITS, which would streamline allowable deductions for self-employed individuals and professionals to compensate for salaried workers’ tax relief.

Under the committee’s proposal, an individual engaged in trade or business and the practice of a profession may opt for a standard deduction not exceeding 40% of gross income, instead of the current 10%.

Mr. Javier said the SNITS provision was expected to generate a net gain of almost P1 billion in revenues for the government.

But Ms. Recente said she would negotiate with the legislator on deductions for self-employed individuals, as well as limit the additional exemption for dependents of wage earners to P20,000 each.

"The 40% tax deduction to the self-employed is not enough to cover the revenue losses from the very high tax exemption [for fixed-income earners]," said Ms. Recente. She did not, however, specify a rate for the optional standard deduction under SNITS.

In an earlier position paper, the Finance department said the SNITS would allow the government to check tax avoidance practices such as bloated business expenses. The DoF said the cost of goods sold eat up as much as 76% of a businesses’ gross revenue or gross sales, while operating, administrative and other business deductions account for 19% of gross revenues or gross sales.

"Thus, 95% of gross revenues are being claimed as business deductions, leaving only 5% as the tax base," the DoF said.

The Senate has yet to formally discuss the proposal from the House, where all tax bills must originate, but the legislator in charge of tax bills said he would not agree to higher taxes on other sectors to compensate for bigger tax deductions for wage earners.

Senator Francis Joseph G. Escudero, ways and means committee chairman, told BusinessWorld he would "always support" any measure "for the economic relief of our people."

"I have not seen their version and it has not even passed. One thing is sure, [we] won’t allow a rider imposing new or additional taxes to compensate the loss of revenues [in the government]."

The House is expected to pass the bill on second reading on Monday. — with a report from Anna Barbara L. Lorenzo

______________________________________________________________________

real estate central philippines
Copyright ©2008-2020