Senate President Aquilino Pimentel Jr. himself has filed a counterpart measure to the Duterte administration’s pending tax reform bill in the House of Representatives as he underscored the importance of implementing tax policy and administration reforms meant to raise sufficient revenues for the government’s unprecedented public investment program, while at the same time plugging value added tax (VAT) leakages he estimated to reach P90 billion every year.
Pimentel said his proposed tax reform measure, Senate Bill No. 1408, will help the Duterte administration raise enough funds for its “Ambisyon Natin 2040” agenda that aims to eradicate extreme poverty in the country within one generation from now.
SB 1408 is similar to House Bill 4774 filed by Quirino Rep. Dakila Carlo Cua, who chairs the House ways and means committee that is hammering out a refined version of this first package of the Comprehensive Tax Reform Program (CTRP) of the Department of Finance (DOF)
Both bills aim to lower personal income tax (PIT) rates along with while revenue-enhancement measures to make up for the anticipated reduction in tax collections resulting from the hefty PIT cuts.
These accompanying tax reforms include adjusting excise taxes on fuel and automobiles and broadening the VAT base by limiting exemptions to raw food and other necessities such as health and education while keeping the current zero-tax privileges of senior citizens and persons with disabilities.
As in HB 4774, Pimentel’s measure also aims to set a uniform rate for taxes on property transfers by proposing a flat rate of 6 percent for both estate and donor taxes.
To complement the tax policy reforms in SB 1408, Pimentel also proposed the required use of electronic receipts and the connection of cash registers and point-of-sale or POS machines to servers of the Bureau of Internal Revenue (BIR) for simultaneous reporting of sales and purchase data, among others.
While under the Constitution, tariff bills should originate in the House of Representatives, the Senate may propose its own measure or concur with the House-proposed amendments.
The bill’s target, Pimentel said, is to generate a net gain of P100 billion in the first year of its implementation, which will be “earmarked for investments in infrastructure, education, and healthcare.”
“Like any investments, we must look beyond the short-term challenges this measure poses and focus on the significant, tangible, and long-term benefits that countless Filipinos today, and in the future, will enjoy. It is high time that we place a premium not just on the amount of tax to be collected, but on how the money collected will be spent to help the poorest among us,” Pimentel said in his bill’s explanatory note.
Pimentel also said reforms in personal income taxation are long overdue as PIT rates have remained unchanged since the effectivity of the National Internal Revenue Code (NIRC) in 1997, “despite an increase in the rates of minimum wages, consumer price index, and the standard costs of living.”
“To address this imbalance, this measure adjusts the Personal Income Tax schedule found in the NIRC to correct for ‘income bracket creeping,’ a situation where inflation pushes levels of income into higher tax brackets that result in an increase in income taxes without corresponding real increase in purchasing power,” he said.
Earlier, Finance Secretary Carlos Dominguez III welcomed the move by the House committee on ways and means before the Lenten congressional break to “approve in principle” the first phase of the CTRP as outlined in Cua’s HB 4774.
Dominguez said the decision of the committee to pass tax reforms as a package rather than on a piecemeal basis is a step closer for the Congress to help the Duterte administration fund its ambitious agenda to sustain the high-growth momentum, dramatically cut poverty and transform the country into a high middle-income economy by 2022.
The Cua-chaired ways and means committee voted in its eighth public hearing on the CTRP to “approve in principle” tax reform as a package and create a Technical Working Group (TWG) that would consolidate the DOF-proposed reforms with other tax-related proposals by the lawmakers.
This has put to rest concerns that the committee would only approve the bill’s popular provisions, which is the lowering of PIT rates, without the corresponding measures that would let the Duterte administration raise enough funds for its ambitious public investment program and offset the revenue erosion arising from the reduced PIT take.
Dominguez said the CTRP bill would “enable the government to make the country’s tax system more progressive, especially for low- and middle-income earners, and at the same time generate sufficient revenues for unmatched higher spending on infrastructure; on education, health and other forms of human capital development; and on social protection for the poorest Filipinos to cushion the initial impact of the proposed adjustments in consumption taxes.”
He expressed the hope that the other members of the House of the Representatives, as well as the senators, would similarly see the urgency of passing this tax reform package in full, possibly by the middle of this year, “to set the economy on its irreversible path to high—and inclusive—growth under the Duterte presidency.”
“Package One of the CTRP, as contained in HB 4774, is the launching pad for the Duterte administration’s 10-point socioeconomic agenda that aims to transform the Philippines into an upper middle-income economy (like Thailand) by the time the President steps aside in 2022 and into a high-income one (like Malaysia) in one generation or by 2040,” he said.
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