Finance dep’t to submit another tax reform tranche to Congress by month’s end

January 24, 2018 at 10:56

Finance dep’t to submit another tax reform tranche to Congress by month’s end

The Department of Finance (DoF) will submit to Congress another tranche of the second tax reform package by the end of the month that will impose more levies on tobacco, mining and coal — which have been covered by Republic Act No. 10963, or the Tax Reform for Acceleration and Inclusion (TRAIN) that makes up the first of up to five planned packages — alcohol products, and a value-added tax (VAT) on gaming income.

“In the following months, we will propose the next tax reform packages. We have already submitted to Congress our proposal for Package 2, covering reforms on corporate taxation and modernizing fiscal incentives. By the end of the month, we shall also be submitting ‘Package 2+,’ which includes taxes on tobacco, alcohol, mining, coal and casinos,” Finance Secretary Carlos G. Dominguez III said in a speech before members of the Management Association of the Philippines at the Shangri-La at the Fort in Taguig City yesterday.

Tobacco, mining and coal tax hikes are already provided by Republic Act No. 10963, or the Tax Reform for Acceleration and Inclusion (TRAIN) that took effect this month.

Asked why the Finance department would introduce another package on some items already covered by RA 10963, Mr. Dominguez told reporters that the new tranche will seek to “rationalize bills already filed in both houses”, including Senate Bill No. 1599 and SB 1605 that raises excise tax rates on tobacco products by a bigger amount than TRAIN had provided.

“But there are other non-tax measures that we might be able to put in,” Mr. Dominguez added.

As for alcohol products, he said: “That was really planned originally… because the ‘sin’ tax was supposed to be reviewed.”

“But actually what they only adjusted is the cigarette tax. So there is still the alcohol tax that has not been reviewed.”

Mr. Dominguez also noted that “package 2+” will revise the mining sector’s overall fiscal regime. “The revenue from mining comes from many sources. One is excise tax, the others are the other fees that they have to pay. We have to rationalize those,” he explained.

Asked what casino tax will be included, Mr. Dominguez replied: “VAT”, confirming that it will be imposed on gaming income.

The Finance chief said that there is “no estimate yet” on the possible revenue take of the new proposals.

The first of up to five planned tax reform packages, TRAIN cuts personal income tax rates and plugs the expected foregone revenues by either increasing or adding taxes on fuel, cars, coal, tobacco products, mining, sugar-sweetened drinks and some investment products, besides simplifying donor’s and estate taxation, among others.

Despite individuals’ estimated additional take-home pay due to the cut in personal income tax rate, household consumption — long an anchor of gross domestic product growth — is seen to grow by just a “modest” pace in the face of higher consumption taxes, S&P Global Ratings said in a note yesterday.

“The first installment of tax reform has recently been passed, lowering personal income taxes while raising taxes on key consumption items,” S&P Global Ratings said in its Asia-Pacific Economic Snapshots report.

“As such, the impact on private consumption is likely to be modest in the near term, at a time when its growth has been slower than trend.”

The Finance department submitted another package to the House of Representatives two weeks ago that seeks to cut corporate income tax rates gradually to 25% from 30% currently in order to put this levy at par with those of Southeast Asian competitors, as well as to remove tax incentives from sectors that do not need them.

The government hopes to submit to Congress the remaining two to three other packages within the year, ahead of the 2019 senatorial and local mid-term elections.

“By the second half of the year, we aim to submit package three, which tackles property taxation, and finally Package 4, which tackles passive income and financial taxes,” Mr. Dominguez said in his speech yesterday.

While the entire tax reform program primarily aims to shift the burden to those that can afford to pay more, the government expects its additional revenues to cover up to a fourth of the planned P8-trillion infrastructure expenditures until 2022, when President Rodrigo R. Duterte will end his six-year term.




  All rights to the stock images are owned by Getty Images and its image partners and are protected by United States copyright laws, international treaty provisions and other applicable laws.
Getty Images and its image partners retain all rights and are available for purchase by visiting gettyimages website.

Arangkada Philippines: A Business Perspective — Move Twice As Fast | Joint Foreign Chambers of the Philippines