The Finance Department on Monday submitted the first package of its comprehensive tax reform program to the House of Representatives, amid calls from lawmakers to fast-track the proposal.
Finance Secretary Carlos Dominguez III told reporters at the sidelines of the plenary deliberations of the proposed 2017 national budget the agency handed the tax reform package to House ways and means committee chairman and Aurora Rep. Dakila Cua. The first package aims to boost revenue collection by P200 billion.
Cua earlier urged the Finance Department to submit the tax package as soon as possible.
“This has been a matter long-awaited by the public. [Besides] President Rodrigo Duterte has been in office for several months now and he wouldn’t be pleased if you delay any longer,” Cua said during a committee hearing last week.
“Congress which is the slower institution is running faster than you already. So do not delay any further. I know you want to refine but it will never be perfect so submit it and we will refine it together,” he said.
Dominguez said the first package of tax reforms was designed to reduce personal income tax rates while raising revenues to help fund the Duterte administration’s 10-point socioeconomic agenda for inclusive growth.
The first package proposes to adjust personal income tax and consumption tax brackets; reduce the personal income tax rate to 25 percent over time except for the highest income earners which will be taxed as high as 35 percent to maintain progressivity; and shift to a modified gross system to simplify the personal income tax system.
This measure is expected to gain P359.7 billion in additional revenues, offsetting P159 billion worth of projected revenue losses.
Package one will also expand the value added tax base by limiting the exemptions to raw food, education and health. A targeted subsidy program will be set up that will protect the poor and the vulnerable from the expansion of the VAT-base.
Other measures seen to compensate for lower income tax rates are the increase of excise taxes on all petroleum products and indexing it to inflation; a tax on sugary products indexed to inflation; relaxing the bank secrecy law for fraud cases; and including tax evasion as a predicate crime to money laundering.
A quarter to a third of the net gain from the proposed tax reforms would be allocated for the conditional cash transfers, lifeline electricity subsidies, direct discounts and higher Philippine Health Insurance Corp.coverage, among other targeted subsidies, for the sectors to be affected by the new fuel prices arising from the adjustments in the excise tax on petroleum products.
Dominguez said tax reforms were crucial to the task of reconfiguring the Philippine economy to attain the Duterte administration’s goal of inclusive growth.
The finance chief said the remaining packages would also be submitted “in a matter of timing.”
“That’s only a matter of timing. There’s package one….to four, but that doesn’t mean we’ll wait one year. Just a few months, to make it faster,” Dominguez said.
Cua said he had yet to read the tax proposal from the Finance Department. Cua told reporters that he wanted the revenue -gaining and -losing measures of the tax bill to be filed separately to fast-track the passage of the measure.