Javier bill curbs tax deductions
Roy Pelovello
Manila Standard
A Cabinet plan to rationalize the fiscal incentives system gains support in the House of Representatives, with Rep. Exequiel Javier filing a bill to set curbs on the tax deductible expenses of professionals and self-employed.
Javier’s proposal is embodied under House Bill 5257 or the Simplified Net Income Taxation.
Javier said his proposal would require professionals and self-employed to use an optional standard deduction of 40 percent of their gross income for purposes of determining their liability.
According to Javier, his proposal will save the government about P11 billion in revenues forgone each year with the tax deduction scheme.
“This bill seeks to redress the imbalance of taxation between the wage earners on the one hand, and the professionals and self-employed on the other hand,” Javier said.
Javier noted that under the National Internal Revenue Code, professionals and self-employed individuals are taxed at the same rate as wage earners.
But he said that while salaried workers are allowed only personal and additional exemptions, professionals and self-employed are entitled to “a full array of itemized deductions” from gross income allowed also to corporations.
He noted that 80 percent of tax revenue from individuals is collected from wage earners and only 20 percent comes from professionals and self-employed individuals.
Likewise, Javier pointed out that in terms of tax paid on gross income, the effective tax rate for wage earners is 15.25 percent while it is a measly 1.14 percent for self-employed and professionals.
Based on this system, Javier said a wage earner receiving a gross income of P200,000 a year pays a tax of P30,500 while an accountant or doctor earning the same pays a tax of only P2,280.
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