DOF chief sees ‘uphill climb’ for legislative passage of remaining tax-reform packages

August 29, 2018 at 12:56

DOF chief sees ‘uphill climb’ for legislative passage of remaining tax-reform packages

The Department of Finance (DOF) is confident that the remaining packages of the Comprehensive Tax Reform Program (CTRP) will be passed into law this year despite the holding of the midterm polls in 2019.

Finance Secretary Carlos G. Dominguez III said during the second Economic Journalists Association of the Philippines forum on Tuesday held at the Bureau of the Treasury in Manila that the Duterte administration’s push to reform the country’s tax policy is crucial in terms of further sustaining the growth of the economy.

“If we do not modernize our infrastructure today and if we do not modernize our tax policy this year, we cannot possibly sustain our pace of growth. We cannot become the dynamic and inclusive economy that is the norm for our region,” Dominguez said.

He also expressed confidence that the remaining packages of the CTRP will be passed within the year, even if the election season starts as early as October this year with the filing of certificates of candidacy of election hopefuls with the Commission on Elections. “Yes I am [confident],” the finance chief said.

Dominguez explained that the passage of the remaining tax-reform packages into law will always come with challenges, but pointed out that the DOF always keeps its channels open to dialogue with the different sectors.

“To be sure, we are facing an uphill climb in the effort to pass the succeeding packages of the Comprehensive Tax Reform Program. Some of these reforms run against deeply entrenched vested interests. It is always difficult to reform tax policies on the eve of an election year,” he added.

When asked whether the DOF is amenable to a watered-down version of the tax packages, Dominguez pointed out that the version should not result to more than a 3-percent deficit in the end.

“The deficit? It’s cast in stone. We will not prejudice the entire economy by exceeding 3 percent or around that area,” he said.

Earlier in the month, the DOF has reported that it has submitted all packages under the CTRP to Congress, with the last two packages namely Package 3 and Package 4 already submitted to Congress in July.

Package 3 of the CTRP, which focuses on reforming property taxation in the country to make the valuation system more equitable, efficient and transparent, was submitted on July 26, while Package 4 focusing on the rationalization of capital income taxation was submitted on July 24.

Finance Undersecretary Karl Kendrick T. Chua said the first CTRP package, which is the Tax Reform for Acceleration and Inclusion (TRAIN) law, was designed to provide hefty personal income-tax cuts for 99 percent of Filipinos and, at the same, raise supporting funds to enable the government to spend big on infrastructure and human capital development.

TRAIN, or Package 1A, was signed into law by President Duterte in December 2017 and was implemented starting January 2018.

The other half of the TRAIN, which is Package 1B, including measures on the proposed tax amnesty program and adjustments in the Motor Vehicle Users Charge, was submitted in 2016 but was not approved together with TRAIN.

Package 2 plus, which proposes to increase the excise tax on tobacco and alcohol products and increase the government’s share from mining, is currently pending in Congress. For the tobacco and alcohol tax, the DOF adopted Senate Bill 1599 introduced by Sen. Emmanuel D. Pacquiao, while for the mining tax, which is House Bill (HB) 7951, was filed by Rep. Estrellita B. Suansing.

Package 2, which was submitted in January 16 this year, is meant to fix the flawed corporate taxation system in the country that has generally favored a select group of corporations and barred both the national and local governments from generating a commensurate level of revenues from certain businesses and individuals.

The House of Representatives has already concluded its technical working group meetings that consolidated 12 similar measures and inputs from stakeholders seeking to lower the corporate income-tax rate and modernizing investment incentives under HB 8083, which is now more popularly known as the Tax Reform for Attracting Better And High-Quality Opportunities (Trabaho) Act.

HB 8083 is set for plenary interpellation and second reading when the House resumes session after the one-week congressional break.

“So that’s our target…to have all the tax measures passed before the end of the year,” added Budget Secretary Benjamin E. Diokno.


  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.

Copyright © 2019 Arangkada Philippines: A Business Perspective — Move Twice As Fast | Joint Foreign Chambers of the Philippines