Senator Sonny Angara, chairman of the ways and means committee, on Sunday pledged to act on the House bill granting amnesty on unpaid estate taxes once it is passed and transmitted to the upper chamber.
Angara said it will be paired with a measure that will reform estate taxes to include hiking deductions to comfort “bereaved families.”
“We want our grieving families to be spared from further anguish in paying high estate taxes which often delay the distribution of the assets to the heirs, “ the senator pointed out.
In the desire to revamp the estate tax regime, Angara said his committee will be adopting an “Una ang Pamilya” philosophy, “by setting rules that are easy to comply with, and rates that are affordable.”
“We will lighten the tax burden on a deceased’s assets in order to lighten the grief of the heirs. But if this will benefit the government as well and gives it more money for social services, then all the better,” he said.
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.
Finance officials have said that owing to many reasons, collection of estate taxes averages P1 billion yearly from a potential P10 to P50 billion.
“This tax hurdle, plus the unfamiliarity with estate taxes and cultural avoidance to discuss death-related affairs, has led families to delay settling the estate, resulting in huge penalties and surcharges while use of assets are not maximized,” Angara stressed.
He explained that the Senate’s plan is to “trim estate tax rates” and increase the tax deductible expenses—such as the medical expenses incurred by the deceased.
Angara has filed Senate Bill 980 which incorporates the estate tax reforms he is advocating.
Foremost of these is adjusting the 1997-era estate brackets to inflation which, he said, “would result in more than doubling the tax-exempt values.”
Angara proposed that in computing the estate tax, the standard deduction must be increased from P1 million to P2 million.
In addition, a family home will not be taxed if it is valued at P2 million, double the present threshold of P1 million.
Heirs can also charge to the estate medical expenses of up to P1 million and funeral expenses of up to P500,000, in recognition, he said, “of the high cost of dying the country.”
Angara’s bill also allows an authorized heir or estate administrator to withdraw P200,000 from the bank deposits of the deceased.
It also mandates a resetting of brackets every three years, with inflation as basis.
“This reform is good for the heirs because they can now enjoy the assets, good for the government because collections will increase, and good for the economy because assets will be freed for development,” he said.
Official records show that only seven in every 100 deaths in the country settle estate taxes while payment of the latter accounts for 1/6th of 1 percent of total Bureau of Internal Revenue collections.