Press Release
August 28, 2016

Cut expenses, red tape first before imposing new taxes

Save and simplify - these the government must first do before it imposes new tax measures that will bring in two-thirds of a trillion pesos in fresh revenues annually.

Senate Minority Leader Ralph Recto urged the administration to scout for frivolous and unnecessary expenses which can be cut or totally done away with before jacking up tax rates.

To encourage more people to pay taxes, Recto said government must also "simplify, shorten and streamline" procedures in revenue offices.

Cutting red tape is an effective tax administration measure, he said. "The tax program must be predicated on eliminating red tape first."

Recto believes "many taxpayers are willing to pay their dues if only revenue processes are not cumbersome and complicated."

"The Income Tax Return is 11 pages long. A small business has to undertake 36 tax-related transactions annually. Because of complicated tax rules, a small trader has to put in his payroll an employee whose sole job is to liaise with government offices full-time," he said.

Recto said "steep penalties, high fines, short compliance period, and arbitrary levying of surcharges" should be reviewed and tempered as these prevent individuals from coming forward to comply.

"Tax payment is always by confession. 'Yung iba, ayaw na kasi natatakot sa laki ng multa kaagad. Gustong magbayad ng tama, pero discouraged sa parusang nakaabang na agad," he said.

Citing a report issued by the World Bank last October, Recto noted that red tape costs the country P140 billion in opportunity losses annually.

The same report ranked the Philippines at a low 95th among 189 economies in overall ease of doing business.

He said savings, on the expenditure side, and simplifying tax-paying rules will combine to raise money that will lessen the pain of the new taxes the Duterte administration is mulling.

"Let us first conduct an inventory of our expenses. Saan pwede magbawas? In short, savings, not of the brutal austerity kind, but operating overhead," Recto said.

"If we cut utilities and communications expenses, meaning power and cellphone use by just ten percent, will we save P2.3 billion annually," Recto said.

"If we will renegotiate office rent of government offices, and bring it down by 15 percent, we can save P2 billion a year," Recto added.

The Duterte administration is readying a tax package, which, when fully implemented over a period of years, is projected to rake in P566.4 billion a year.

This, Recto noted, is almost three times the P193.8 billion in annual collections that will be foregone once individual income and corporate tax rates are reduced.

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