PNoy: Tax cuts may backfire
President Benigno S. Aquino III on Monday said he was not amenable to the lowering of income tax rates, expressing doubts if the move would bring about benefits to Filipinos even as he insists that tax collection must first improve.
“The question is, will the lowering of income tax level be beneficial to our countrymen? I am not convinced as of the moment,” said Aquino during a media interview at the Iloilo Convention Center in Iloilo City.
Aquino said that when he ran for the presidency in 2010, he promised that he would not order an increase in income taxes.
The President said that the government would first improve tax collections, but on the current tax rates as based on law.
“We would first collect taxes based on the current law. Now that we have managed the deficit, the deficit has been decreasing, as a proportion or as a ratio to the gross domestic product, in turn, was one of the factors why we were given an investment grade status of all these ratings agencies. And we are continuing to be given the upgrades,” said Aquino.
However, Aquino explained, that if the income tax is lowered, revenue collections would decrease, and the budget deficit would increase.
The bigger the deficit, he said, would be a negative factor when credit rating agencies start to evaluate the country’s economic performance.
One of the possible moves to cushion the effects of lowering income taxes would be to raise the value added tax, which in turn will hit the income of all classes of society.
The President said there is a possible increase in the price of oil that may eventually affect cost of services and products, such as transportation, electricity, and others.
Aquino said (income tax cuts) could be reconsidered if there was a budget surplus, but given the current financial conditions, the country cannot afford to lower any taxes.
The President said lowering income taxes may also go against the progressive taxation for which the constitution requires, which means those who have more should pay more, and those who have less should pay less, but the effects of lower income taxes may even hit the incomes of the smallest income earners in the country.
Aquino said his administration promised that there would be no increase in the income taxes.
What the government increased was the “sin taxes” since these involved the health of a person.