THE DEPARTMENT of Finance (DoF) wants the remaining tax reform segments out of the legislative mill by December, leaving a little more than three years for the current administration to make sure they start yielding the desired outcomes of “fairer” taxation, a wider base and bigger collections.
A DoF presentation at the Philippine Economic Briefing in Davao City on Friday last week showed an increase in alcohol and tobacco excise taxes — besides what is already provided initially by Republic Act No. 10963, or the Tax Reform for Acceleration and Inclusion Act which took effect in January — is targeted for ratification by Congress this June.
RA 10963 cut personal income tax rates to give households more money to spend and covered the resulting foregone revenues by adding taxes on cars, fuel, sugar-sweetened drinks, some minerals, and tobacco products, among others, and removing several value added tax (VAT) exemptions.
Inserted in the second package — composed mainly of a cut in corporate income tax to 25% by 2022, when President Rodrigo R. Duterte ends his six-year term, from 30% currently and the removal of redundant tax incentives — which DoF submitted to Congress on Jan. 16 are proposals to remove VAT breaks of coal and casinos. This package is targeted for ratification by December.
Targeted for ratification also by December are changes in property taxation and valuation to give national and local levies in this sector a uniform framework, reforms in capital income and financial taxes, as well as a comprehensive mining tax that will give the government a bigger share of miners’ revenues.
Proposals for a general tax amnesty — designed to widen the tax base — and relaxed deposit secrecy that will make it harder for tax cheats to hide after this offer are expected to be passed by the House of Representatives this month.
RA 10963 is now projected to raise P82.3 billion in 2018 — the law’s first year of implementation — after tweaks by the House and the Senate whittled down the amount from P149.6-157.2 billion initially expected when the DoF submitted its proposal of this first of up to five tax reform packages to both chambers in September 2016.
Ratification by December will ensure that tax reforms will be spared of mounting populist pressures to be expected as lawmakers prepare for mid-term elections in May 2019.
The DoF had said that recommending a fifth package — made up of increased tax rates on luxury items like jewelry and yachts — will depend on how preceding tranches jack up state revenues. The tax reform program is supposed to yield P2 trillion in additional revenues, which will help finance the government’s planned P8-trillion infrastructure program until 2022. — Melissa Luz T. Lopez