Abrea calls for higher taxes on high-income earners

Añadido: 2026-05-15

[00:00:00]And joining us this morning is Mon Abrea, chief tax adviser of Asian Consulting Group and known as the Philippines' tax wiz. Good morning, Mon.

[00:00:07]Welcome back to the program. Thank you, Valen. Good morning. All right. So, today is the deadline for taxpayers, but already the BIR beat its April collection target despite the tax extension.

[00:00:18]>> you're cheering for BIR for >> [laughter] >> hitting the target.

[00:00:21]>> No, but what does this say about compliance of taxpayers? Well, honestly, because we believe that because it's it's much easier now and you can just do it anywhere, anytime. It's electronic.

[00:00:32]So, beating the deadline is no more it's no longer a big issue. Okay. Yeah. All right. But, the BIR says, like what you mentioned, that digital services helped lift collections. But, are taxpayers really feeling the ease of paying their taxes? Well, maybe not for our MSMEs because we still have several requirements that becomes costly for them, like the books of accounts.

[00:00:56]I mean, the duplicacy of reporting.

[00:00:58]You've already reported your sales in this return. You have to report it again in this and there's another schedule.

[00:01:03]Then, come when it comes to audit, you need to present again the same set of schedules or books of accounts. So, I guess the issue now is no longer collection, but more of fairness and the ease of paying taxes.

[00:01:17]All right. Now, today is the deadline, as we mentioned, for those who availed of the extension. What should taxpayers watch out for to avoid penalties? Well, number one, they have to make sure they reconcile all their receipts and all their returns. You know, sometimes we are in a hurry that we end up maybe there will be some glitches, more zeros, like some other people claim. So, we should be careful about that because the moment we sign it, we are already subject to perjury. You cannot just say, "Oh, it's a typo error." Because you sign it as that you are saying it's all true and based on your records. So, it has to be really based on re- >> Okay. So, that's one thing that the taxpayers must keep in mind. All right, well April collections top the BIR's internal target, but we are still below the monthly projection under the 2026 budget assumptions. Should this be a concern? Yes, especially that we have so many political issues that are in a way um affects the behavior of taxpayers. You know, when they when they lose trust or there's lack of trust in your government, and at the same time you feel like the money are not being spent properly, then you also affect the the the diligence and the the the compliance of taxpayers, especially that we follow a voluntary tax system.

[00:02:34]>> Mhm. Now, you have long been pushing for raising the tax-free income threshold to 1 million pesos by 2028. How realistic is that, and how will it exactly help middle-income earners? Well, for the longest time the government has relied on the middle class. Given the statistics provided by BIR, 82% of our personal income tax comes from our compensation income earners.

[00:02:57]While our high-income, high-net-worth individuals only contribute 4%. I think it's high time to to correct that, and not just as a form of relief, but as a form of justice. So, is it possible?

[00:03:09]Yes, very much possible, as I've mentioned earlier. The issue right now is no longer collection, but fairness.

[00:03:14]Are we collecting from the right people?

[00:03:16]Mhm. Given that there's so many unexplained wealth, not only from the government officials or politicians, but also from high individuals, professionals, who seemingly are showing a lavish lifestyle, but their tax return is zero, or no tax return at all. So, I guess we need that kind of efficiency in terms of making sure that everyone pays their what is due. Then, at the same time, if we lift the bank secrecy, we will be able to collect the unexplained wealth.

[00:03:44]From this flood control, the farm money, I mean, all these issues or political noises should be red flag for BIR. Whoops. Oh, there's donation. Oops, there is this a money flow and etc. Then BIR should be running after them. But so far, they have filed case against Harry Roque. So, it seems like uh they are missing either they don't have the target or they're missing their target.

[00:04:08]Well, you also say that raising the tax-free uh income threshold is better is a better long-term solution than let's say uh cutting VAT. Why is that better and how is this approach uh going to be more targeted and more sustainable? Number one, suspending any tax for that matter, whether excise VAT or reducing it at this point in time we're in crisis is not fiscally responsible. Why?

[00:04:32]Uh as we speak, we have approved 6.7 trillion national budget and only 4 trillion will be collected by BIR and Customs. Not yet collected, will be collected. As you said, they collected around 1 trillion already, but we are they are supposed to collect until end of the year up to at least 4 trillion.

[00:04:49]That means we are on a budget deficit.

[00:04:52]The difference will be loan. That's increase in national debt. So, we expect that by end of the year we will hit a 20 trillion national debt. Suspending taxes will mean more debt. And we don't want that because in the end we will the ordinary Filipinos will still have to uh um pay for it with interest. Uh then another thing is it's disproportionately beneficial to the rich because higher income earners mean that they consume more. So, any suspension or reduction in VAT, which is a consumption tax, will mean more benefit for those who spend more. While uh increasing the take-home pay or the uh income tax exemption to 1 million means empowering the middle class.

[00:05:33]Meaning they would be able to This is uh increasing the purchasing power of the middle class in more consumption, better for the economy. Well, Mon, you are also proposing the creation of a national revenue authority that would unify the BIR and the Bureau of Customs, but what problems in the current system are you seeing? Uh three things. First is the fiscal and political uh independence. There's There's no independence. Number one, it's a political body under the Department of Finance. And uh as a political appointee, as a presidential appointee, you cannot really run after the allies of the president. Uh like in the flood control, nobody has has been charged of tax evasion even if it's pretty obvious that there's a question in the net worth of Saln of the former speaker, uh the Saldi and all these people, but none. So, you can see that there is really so much political uh issue there. Then at the same time, the digitalization. We have been talking about digitalization, but it's like a pet project or a classroom project. It's always launched, but it never get to completion. So, I guess if we try to modernize the tax administration uh rather than other than the fact that they operate in silo. The BIR and Customs, they don't share database. So, the smugglers get away with their taxes while at the same time they get away from BIR as well. When in fact, they should be sharing uh the data. And I think the the the most important part of this uh digital this modernization is the power of data analytics to really make sure that it is data driven and AI powered or tech powered. Because right now, it's highly manual. And it's more of It's very pretty.

[00:07:16]>> second guessing second guessing rather than data driven that oops, this is industry's high risk. This individual is high risk. There's this data whether it's Saln, income tax return, or purchase of uh luxury cars or condominiums. That that this should be red flags or trigger audit, but that's not exactly what's happening right now.

[00:07:35]Well, there are countries that already implement a modern revenue system including Singapore, Canada, and even the United Kingdom. What are some of the lessons that we can pick up from them?

[00:07:44]Well, as I've mentioned earlier, I think it's really important that we allow the tax administration to operate independent of the politics and the budget constraint. Because if they're always constrained with resources, then they cannot really collect on behalf of the government. So, let them operate independent of all these political and budgetary constraint. Give them as much resources so that they can hire the best of the best and at the same time can really use or harness the technology to make sure that we will be able to broaden that taxpayer gap. Because right now, out of 118 million Filipinos, only roughly 20 million is registered taxpayer. So, what are the rest? Ghosts?

[00:08:23]Babies? Why are not they registered? And according to the BIR's record, there are roughly less than 100,000 OFWs, but we know that there are more than 10 million OFWs. So, there is really an issue just on the database alone. And it can only be improved if we fully digitalize it and that we give them as much resources as they need. That is not at the mercy of Congress or politicized, especially when they have to do their audit and investigation. I honestly believe just auditing unexplained wealth, we can collect as much as 1 trillion pesos. Ah, there you go.

[00:08:56]>> [laughter] >> All right. Well, shifting gears, Mon, let's talk about the 2026 Philippine investment mission.

[00:09:01]You've already had different missions across Vietnam, Thailand, China, and in South Korea, and now the Philippine delegation is headed to Australia.

[00:09:08]>> Yes. But first, what kind of interest are you seeing from foreign investors when it comes to the Philippines?

[00:09:13]Honestly, because we are at the heart or center of the ASEAN region with the 600 million population, it's really attractive for foreign investors to look at the Philippines. But you know, it's surprising when I was in China last month that they they the political issues don't matter to them that much.

[00:09:32]They didn't ask They didn't ask about the impeachment. They didn't ask about Duterte. Their first question was the economic policy. Will it change if there will be election? How how stable it is, or should we be worried that you will have election in 2028? Because you know, investors don't look at the headlines alone. They don't invest for 1 to 2 years, unlike most of our politicians.

[00:09:56]Investors invest for 10 to 30 years. So, they look at the economic fundamentals, and that's where we are strong. We are very strong in terms of fundamentals.

[00:10:05]These political noises are temporary. It doesn't change the landscape. It doesn't change the policies. While we can change laws, but it doesn't retroact. Okay.

[00:10:14]>> So, the moment you get incentives now, no president can change it. Moving forward, yes. But if you avail it under the BBM administration, you get it until the end of the contract. So, you're protected. So, even with all the political instability, I mean, just this past week I mean, we witnessed a lot of um major events, a series of unfortunate events from the leadership shakeup at the Senate to that shooting incident.

[00:10:36]Doesn't affect investor confidence?

[00:10:38]>> Surprisingly, a lot of them are messaging me, and I'm just saying, "Well, please be entertained >> [laughter] >> while we try to continue fixing our policies." Because you um this is not a surprise, but they are more after the reforms. Are the reforms ongoing, moving?

[00:10:54]>> Mhm.

[00:10:54]Rather than the change in Senate leadership, they they ask about the global minimum tax. Uh will you be adopting it? Then I replied to two, three investors in the US and UK. Yes, the Department of Finance already committed that they will prioritize it this year. Those are more important to them than the headlines. And we're not blaming the media because it's really the news. Yeah. But our mission is now becomes more important because we can talk to them one by one in a private conversation to tell them that yeah, this is the news. It's really what's happening politically, like in the US. I mean, across the world. It's not like it's isolated case in the Philippines.

[00:11:31]But at the moment, they hear about the reform agenda, the economic policies that we are working on, the improvement in ease of doing business, they get excited. The next question is, "Who Can you help us?" Of course. The depart- the Department of Trade and Industry, the Board of Investment, the Philippine Economic Zone and Authority, which go with us in our missions, we are all here to help. And that's what we're That's what matter matters most for us.

[00:11:55]Exactly. Things that actually matter are the priority. But, well, you've described the Philippines as an investment-ready economy, and you the mission here highlights opportunities in infrastructure, technology, renewable energy, and of course, tourism. But, which sectors are generating the most interest so far from investors? Well, honestly, the renewable energy is getting much traction, mainly because of the global oil crisis. And let's face it, given all the minerals that we have here, we also attract the mining sector. But, at the same time, the the Philippines has so much potential because we haven't really transformed or converted our live lifestyle and operations governance into renewable energy. The government has not invested much on renewable energy. And I think that's more That's seen as opportunities for a lot of investors. And we tell them that. You know, with the 7,641 islands, there's so much natural resources opportunities in the Philippines, but we need investments. The same with the tourism.

[00:12:56]We need infrastructure. We need more hotels, but we need investors. And that's what we're telling them. Come visit the Philippines, see for yourself.

[00:13:04]Experience it, and you will realize how much opportunities are waiting for you.

[00:13:09]Well, Australia is the next stop for the investment mission. What kind of opportunities are you hoping to unlock when it comes to Australian investors?

[00:13:17]Well, we have long years of partnership with Australia, and we believe that Australia will really be a good partner for our BPOs, primarily. In fact, the IB pop will be with us in the mission in Sydney and Melbourne. So, there's so much on technology, there's so much also on renewable energy, but there's also so much to learn from Australia which is really the capital now of mining technology. Meaning they have really developed expertise on mining and that's something that the Philippines should learn, sustainable mining, not just mining. So, I think it's both ways. We learn from them while encouraging them to look at the Philippines and hopefully invest in the Philippines. That's why the the Why Invest in the Philippines is a critical guide because this is not just a book, but it's a handbook that can be the reference and endorsed by our government that they can really refer to it either on tax issues, any policies, but at the same time access to different government agencies.

[00:14:20]Because I think that's what's important.

[00:14:21]How do we strengthen that relationship?

[00:14:24]That regardless of what's on the headline, if they have questions, who do they call? Who can they contact to? Who can they ask for help? All right, Mon.

[00:14:31]Well, I hope your mission in Australia will be successful and you get to come home with a lot of investments. I'll be back to share with you the good news.

[00:14:38]>> Come back on the program.

[00:14:39]>> Before we go to UK UK [music] Canada US and the rest of the Europe.

[00:14:45]All right, well, please do come back.

[00:14:47]We're going to count you on that. But for now, thank you very much for sharing your insights with us. That was Mon Abrea, chief tax adviser of Asian Consulting Group.