The Finance Department said it was “pleased” with the final version of the first tax reform package under the Comprehensive Tax Reform Program despite some changes introduced by members of the bicameral conference committee.
Finance Secretary Carlos Dominguez III said the agency accommodated a number of other provisions that lawmakers wanted to include in the first Tax Reform for Acceleration and Inclusion bill.
Among the provisions that were not originally proposed by the DoF, but inserted in the final Train bill, were the increase in excise taxes on coal, minerals, tobacco and the introduction of a cosmetic levy.
“We did not propose it in Package One. However, we respect the right of the legislature to introduce taxes as they see fit. It’s part of the law and we accept that,” Dominguez told reporters in an interview.
Based on DoF estimates, the approved tax reform measure would yield around P130 billion in net revenue during its first year of implementation.
“The net revenue effect is certainly very close to the bill that was passed in the House. So we are very pleased that the legislature has given us the wherewithal to begin a really serious infrastructure program,” Dominguez said.
Under the bicam-approved Train bill, the coal excise tax rate would be raised from the current P10 per metric ton to P50 per metric ton in the first year of implementation, P100 in the second year and P150 in the third and succeeding years.
The increase in coal tax was originally planned for the DOF’s tax reform package five.
Asked if the insertion of the coal tax could pose a legal question later on as this provision did not originate from the House, Dominguez said the levy was not considered a new tax, and the bicameral conference committee only adjusted the three-decade old coal tax rate.
“That issue was never brought up and besides it’s not a new tax. Coal is currently taxed at P10 per metric ton so it is actually only adjustment of a tax already existing,” Dominguez said.
“I think what that [Constitution] refers to is a totally new tax cannot be introduced other than by the House of Representatives. However, if the tax already exists, they can adjust it,” he added.
Aside from coal, the final bill also doubled the tax rates on all non-metallic minerals and quarry resources, as well as metallic minerals including copper, gold and chromite from the current 2 percent to 4 percent; and on indigenous petroleum from the current 3 percent to 6 percent.
The lawmakers also decided to increase the rates of the tobacco excise tax from the present P30 per pack to P32.5 in the first half of next year and to P35 starting July 2018 to December 2019.
Between 2020 and 2021, the tobacco excise taxes will further rise to P37.5 and from 2022 to 2023, the rate will increase to P40.
From 2023 onwards, the levy on cigarettes will jump 4 percent annually.
Starting next year, a 5-percent tax will be collected from invasive cosmetic procedures, surgeries, and body enhancements aimed at improving, altering, or enhancing the patient’s appearance.