May 2014 tmap monitor

www.tmap.org.ph

May 2014 Issue

TMAP MONITOR Discussion to Lower Tax Rates in April GMM The Honorable Magtanggol Gunigundo, second district representative of Valenzuela City, graced the April General Membership meeting of TMAP to discuss House Bill 4099, a proposed measure lowering income taxes for individuals and corporations.

Specifically, the bill seeks to restructure the income tax system through reducing individual and corporate income tax rates to 15% from the current rates of 32% and 30%, respectively. The Congressman elaborated on the advantages decreasing tax rates: •

•

The reduction in tax rates will increase disposable income of individual taxpayers which shall stimulate consumption and investment. The potential decrease in income tax collections of around P90 billion shall be offset by lower unemployment and increased VAT collection.

The increase in economic activity will lead to creation of jobs by corporations. Further, the tax savings of corporate taxpayers shall be funnelled towards higher dividend distributions or additional investments in capital equipment, infrastructure

• •

upgrade, research and development, etc.

The decrease and simplification in tax rates shall encourage the informal sector to go mainstream and pay taxes The flat rate of taxation also eliminates revenue loopholes which have been exploited by some taxpayers and BIR officials (Continued on page 3)

TMAP Kapihan on Proposed Tax Measures On May 21, 2014, TMAP sponsored a Kapihan on proposed income and estate tax bills. The session was hosted by Sycip Salazar Gatmaitan at the 17th Floor of the SycipLaw Center, Makati.

TMAP Legislative Committee Co-Chairpersons Atty.

Precy Valer and Atty. Romy Duran facilitated the breakout sessions for a more in-depth discussion of the income tax and estate bills.

The proposed income tax bills discussed by the members included the following: (Continued on page 3)

TMAP Reaches Out to Puray Schoolchildren

Instead of the usual summer activity, TMAP partnered with Black Pencil Project and Climb Against Cancer in its first outreach project to the students and families of Puray Elementary School, Rodriguez, Rizal on May 24, 2014. The “Reach Out” project supports Black Pencil’s advocacy to ensure delivery of basic school materials to project areas all over the Philippines and help increase enrolment among barrio schools.

Puray is a community of Dumagats Remontados (Returning Dumagats) nestled in the valley of the Sierra Madre mountains. It is an hour’s drive away from Montalban town proper. Puray Elementary School has a total population of about 380 students from Grades 1 to 6 together with 7 teachers. Despite the proximity of the area to Metro Manila, the villagers are isolated from the Rodriguez town proper because of the lack of infrastructure such as roads, electrical connection, and telecommunication facilities. During rainy season, flood waters from the Montalban River render the roads unpassable, resulting to frequent cancellation of classes.

The outreach included a feeding program for children for breakfast and lunch and immersion activities such as games, picture-taking and sharing with the children. As the children walk to school daily, new slippers were donated to replace the ones already worn out by the rough terrain. The children happily took turns fitting their new slippers assisted by their TMAP “ Kuyas ” and “Ates”. As a culminating activity, TMAP volunteers distributed basic start ‐ up study kits for the different grade levels which comprise of pencils, pad paper, notebook, eraser, sharpener and ruler, and teacher kits to support the faculty who tirelessly impart their knowledge to the children. The start-up kits and materials were delivered through the support of the Philippine Army who also participated in the distribution to the schoolchildren.

It is TMAP’s hope that the study kits will bring the children one step closer to completing their basic education and fulfilling their aspirations of improving their lives and their community.

Black Pencil Project is a grassroots, interest-based civilian volunteer organization with core advocacies focused on the promotion of child primary education and welfare in remote and indigenous communities in the Philippines.

As early as 7 am, TMAP members, families and fellow volunteers started the journey towards the mountainous community of the Dumagats. It was a long and difficult drive due to rough and narrow roads. Upon arrival, the volunteers were greeted by the smiles of the children and supportive parents who were already assembled at the school grounds and the smell of fried chicken and pancit simmering in the huge woks stirred by the volunteers from Climb Against Cancer.

2

Discussion to Lower Tax Rates in April GMM (continued)

He encouraged TMAP to continue its active involvement in the tax legislation through coordination and discussion with Congressional committees of the implications of new BIR issuances and proposal of needed tax measures.

He encouraged TMAP to go beyond the advocacy of tax education to funding research studies to collect empirical data on the impact of changes in tax rates.

TMAP Kapihan on Proposed Tax Measures (continued)

•

The reduction in rates will enhance Philippines’ competitiveness in the ASEAN region in light of the 2015 integration as currently it has the one of the highest tax rates

The bill exempts individuals earnings less than P30,000 taxable income from income taxes and revises the tax brackets and rates to P30,000 as the lowest bracket subject to 5% and P730,000 as the highest bracket subject to 30%, compared to the current lowest bracket at P10,000 subject to 10% and highest bracket at P500,000 subject to 32%.

For corporate taxpayers, the bill proposed a flat rate of 15% of gross income and a sunset provision of five years for tax exemption of new corporations covered under the special economic zones after the effectivity of the Act. Congressman Gunigundo highlighted to the members the need to build strong alliances with policy makers and taxpayer groups, launch social media campaign to educate taxpayers and to make taxes a core issue in the 2016 Presidential elections.

•

•

•

Senate Bill 716 (Senator Ralph Recto) – adjusts the levels of net taxable income and nominal tax rates for purposes of computing individual income tax, based on current 2013 prices. The consumer price index has almost doubled at 96% from 1998 to May 2013 while the tax brackets and rates remain unchanged since 1997. The bill also proposes to automatically adjust the tax brackets and rates every six years without the need for legislative action.

Senate Bill 1942 (Senator Paolo Benigno Aquino IV) – Similar to Senate Bill 716, it also adjusts the levels of net taxable income and nominal tax rates for purposes of computing individual income tax, based on current 2013 prices and the adjustment of tax brackets and rates every six years. However, it proposes different tax brackets for individuals, notably, the exemption of those earning net taxable income of not over P60,000 and taxation of those earning more than P12 million at 35%.

Senate Bill 2149 (Senator Sonny Angara) – proposes to lower tax rates for individuals to attract human capital and prevent outflow of manpower, due to the current non-competitive rates of the Philippines versus its ASEAN counterparts. The bill lowers the (Continued on page 4)

3

TMAP Kapihan on Proposed Tax Measures (continued) •

maximum tax rate at 25% with the reduction spread over a period of three years.

House Bill 4099 (Congressman Magtanggol Gunigundo) – proposes to reduce individual and corporate income tax rates to 15% from the current 32% and 30%, respectively. The bill exempts individuals earning less than P30,000 net taxable income and taxes those earning over P730,000 at 30%.

The bills also imposes a flat rate of 15% of gross income for corporations and introduces a sunset provision of five years for new corporations to be covered under the regime of economic zones after the effectivity of the Act.

TMAP members noted the following during the evaluation of the income tax bills: • The impact of the decrease in tax rates on individuals and corporations availing of optional standard deduction should be considered to ensure parity among compensation earners and business-owners • There is a need for empirical data to quantify impact of changes in tax rates • The definition of gross income should be further clarified and expanded for the proposed 15% flat rate for corporations • There is a need to clarify the sunset provision for corporations covered by special economic zones as there are also other corporations availing of tax incentives outside of economic zones • The amount of personal exemptions should be reevaluated for simplification of taxation • The withholding tax system should be reviewed in light of the proposed reduction in rates to prevent excess tax credits

•

There should be mechanisms in place for the automatic adjustments of tax brackets in line with changes in the consumer price index and minimum wages

A separate group also discussed estate tax bills, as follows: • Senate Bill 1489 (Senator Francis Escudero) – proposes increase in estate tax exemption from P200,000 to P400,000 to factor in changes in purchasing power • Senate Bill 2028 (Senator Jinggoy Ejercito Estrada) – proposes to increase the maximum allowable deductible medical expenses in the computation of net estate for the payment of estate tax from P500,000 to P1.5 million • Senate Bill 2102 (Senator Juan Ponce Enrile) – proposes to increase the estate tax exemption for a family home from P1 million to P10 million The following were the salient points raised during the discussion: • There is a need to review current estate tax provisions versus ASEAN counterparts • There is a need to review definition of gross estate • The practice of restriction on the withdrawal from bank accounts included in the estate should be reevaluated • There is a need to review procedures for the issuance of tax clearance The inputs from this TMAP Kapihan session and the specific action plans will be communicated by TMAP to its members and the general public through press releases.

4

TMAP Welcomes New Members

Happy birthday to the following TMAP members who are celebrating their respective birthdays in April and May!

TMAP inducted the following new members during the April GMM: •

Ophelia S. Mirafuentes is presently the Financial Controller of Manila Oslo Renewable Enterprise, Inc. She will replace Ma. Theresa Cabigon as the representative of the company. Ophelia is a CPA. She graduated cum laude from Silliman University with a degree in Bachelor of Business Administration major in Accountancy.

Before joining Manila Oslo, she worked for Phil. Phosphate Fertilizer Corp. as Sr. Tax Analyst and the Aboitiz Transport System Inc. as Finance Manager.

•

Atty. Luisito D. Redoble is presently the Financial and Legal Adviser of Medical Trends and Technologies, Inc., a firm engaged in diagnostic services. He has been practicing law for 24 years.

He finished BS Commerce major in Accounting from University of San Jose Recoletos (Cebu City) and law from Arellano University. Before joining Medical Trends and Technologies, he worked for Bayer Phil. From 1994 to 2013, A.P. Acyatan & Co. CPAs and Isidro Redoble and Associates. He is presently part time Accounting Professor at De La Salle St. Benilde.

Welcome to TMAP!

Leilah Yasmin E. Alpad Eleanor L. Roque

Contact us Unit 1904, Cityland Herrera Tower Corner V. A. Rufino & Valero Streets Salcedo Village, Makati City Tel. No. 845-1938 / 840-2325 Fax No. 753-1346 Website: www.tmap.org.ph E-mail: tax_map@yahoo.com

5