Following the passage of estate tax reform in the House of Representatives, the Senate immediately acted on the various proposals that seek to lower, simplify and update estate tax rates to lighten the tax burden of bereaved families.
The House of Representatives on Monday approved on third and final reading two bills granting amnesty in the payment of estate taxes (House Bill 4814) and simplifying the estate tax rate at six percent (House Bill 4815).
HB 4814 allows a person to be exempted from paying the estate taxes on the property of a deceased loved one from prior years to taxable year 2016.
At present, the National Internal Revenue Code currently exempts from tax a net estate of up to P200,000, and imposes four tiers of taxes from five percent to 20 percent based on the value of assets. Heirs to properties worth P10 million and above have to pay P1.2 million plus the 20 percent of the excess above P10 million.
“Like the income tax rates, estate tax rates have not been updated since 1997. This tax burden has led families to delay settling the estate, resulting in huge penalties and surcharges while use of assets are not maximized,” said Senator Sonny Angara, chairman of the ways and means committee, during the hearing on Tuesday.
The senator also cited data from Philippine Statistics Authority which showed that from 2000 to 2013, with an annual average of deaths of 445,000, only 30,000 filed estate tax returns.
“Kaya rin po siguro maraming lupain at iba’t-ibang estate ang naka-tengga lamang ngayon, imbis na ngayo’y pinagkakakitaan at nagiging economically productive,” he added.
Because of such hurdle, collection of estate taxes averages P1 billion yearly from a reported potential of P10 to P50 billion.
To address this, seven different bills were filed by Senators Angara (Senate Bill 980), Dick Gordon and Loren Legarda (SB 107), Nancy Binay (SB 1053), Francis Escudero (SB 769), Senate Majority and Minority Floor Leaders Tito Sotto and Ralph Recto (SB 867), and Senate President Koko Pimentel (SBs 293 and 294).
Under Angara’s SB 980, estate tax brackets will be indexed to inflation, thereby adjusting the minimum net estate subject to estate tax from P200,000 to P460,000. The estate tax brackets shall be adjusted every three years thereafter.
The proposed measure also adjusts the allowable deductions to make it more realistic and equitable such as funeral expenses (from P200,000 to P500,000), the value of the family home (from P1 million to P2 million), standard deduction (from P1 million to P2 million), medical expenses (from P500,000 to P1 million) and the allowable bank withdrawal (from P20,000 to P200,000).
“Dagdag po sa pagluluksa ng pamilya, mayroon mga usaping praktikal na kailangan din intindihin. Halimbawa, ang pambayad sa burol at libing, o ang bayarin sa ospital, kung sakaling sakit ang ikinamatayan. Gusto po nating pagaanin ang pasanin na ito,” Angara said.
Meanwhile, the proposal from the Department of Finance (DOF) seeks to impose a six-percent flat tax to simplify administration, with allowable deductions of up to P4 million (P3-million family home and P1-million standard deduction).
DOF Assistant Secretary Mark Joven, during the same hearing, stated that the government favors abatement law, which only removes interests and surcharges, instead of estate tax amnesty.
Angara said once the House bill is transmitted to the Senate, the committee will prioritize the measure to fast-track its passage.