Press Release
November 22, 2015


Sen. Francis "Chiz" Escudero said the government must go beyond raising the salary of government workers by lowering income tax rates, a move that would also benefit the private sector which employs most of the country's workforce.

"I'm glad state workers will soon get a raise. Although it is top-heavy in favor of public officials and executives, the proposed increase will help government employees keep pace with the rising cost of living. But how about those in the private sector?" Escudero asked.

Escudero, former chairman of the Senate Committee on Finance, maintained that reducing the income tax, which at 32 percent is the highest in Southeast Asia, is the best way to ease the burden of ordinary workers who pay the biggest chunk of the total income tax collected by the government.

There are around 39 million people comprising the country's labor force and about 36 million of them are in the private sector.

Escudero noted that in the last five years, private sector workers have received minimal pay hikes, the latest of which was in April when the National Wages and Productivity Commission implemented a P15 adjustment in the daily minimum wage in Metro Manila, raising the minimum pay to P481 for workers in the non-agriculture sector.

President Benigno Aquino III had earlier endorsed to Congress a bill titled Salary Standardization Law of 2015, which mandates a P226-billion compensation increase spread over four years for the national government's 1.53 million civilian, military and uniformed personnel.

Under the proposed bill, rank-and-file employees will get only up to 22 percent increase, while the President gets a 233-percent raise after four years.

The pay hike does not cover the more than 1.6 million people working in government-owned and -controlled corporations and those holding casual or contractual positions.

Escudero, an independent vice-presidential candidate and one of the proponents of tax reforms in the Senate, however, warned that the existing income tax rates could negate the benefits of the proposed pay hike in the public sector.

"The bigger pay for state workers, the bigger their taxes. It would certainly defeat the purpose of the pay hike, which is to increase the take-home pay of those in government," Escudero said.

Escudero said he is inclined to support the proposal of Sen. Juan Edgardo "Sonny" Angara to adjust the levels of taxable income to inflation.

According to the Bureau of Internal Revenue (BIR), the government stands to lose P30 billion in tax revenues if the bill adjusting income tax brackets and lowering rates is passed into law.

But Escudero said the government can afford the income tax cuts since the projected loss is not even 10 percent of the P303 billion that it underspent in 2014.

"The estimated P30 billion in possible foregone revenues is not even five percent of the cumulative underspending of P623 billion since 2011," Escudero said.

"So bakit nila ipagkakait sa atin 'yun? At tingin niyo ba ibubulsa at itatago 'yun sa ilalim ng kama ng tao? Gagastusin nila 'yan at captured pa rin naman 'yun ng VAT (value-added tax)," he said.

The BIR said total revenue collected in 2014 amounted to P1.334 trillion, of which P784.76 billion was from the income taxes.

Escudero also added that two-thirds of the total collections of the BIR come from the large taxpayers section.

"If you will burden BIR with small taxpayers, they will have less time and effort to run after those earning a lot, to run after those who should be paying more taxes," he said.

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