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Plan for tax amnesties in the works

Posted on September 30, 2016

THE GOVERNMENT will sweeten its tax reform program by offering amnesties in a bid to encourage compliance, the Finance chief said yesterday.

“We are thinking of four tax amnesties,” Finance Secretary Carlos G. Dominguez III said in a tax reform forum at the Makati Shangri-La hotel, citing separate programs for delinquents in estate tax, “regular taxes,” local real property tax and for tax cases with the Bureau of Internal Revenue.

He added that he hoped to “clear up” about 40% of such cases through the amnesty.

Speaking to reporters on the sidelines of a plenary session at the House of Representatives earlier this week, he cited the need for estate tax amnesty “especially for people who’ve inherited lands and they did not change the title.”

The Duterte administration’s tax reform program -- in the initial form presented to lawmakers in the middle of this month -- was estimated to yield P368.1 billion in cumulative net collections over a three-year period as P566.4 billion in projected overall gains were expected to offset P198.3 billion to be foregone.

It consists of five packages:

• The first, designed to yield P200.7 billion in net collections, was to cut personal income tax rates and reduce tax brackets, remove certain value-added tax (VAT) exemptions, increase the excise tax on oil products and peg it to inflation, impose an excise tax on sweetened drinks and peg the rate to inflation, as well as measures aimed at improving tax administration;

• The second, which will yield P1 billion in projected net foregone revenues, will consist of a reduction in corporate income tax (CIT) rate that will be partially offset by streamlining tax incentives to make sure these benefit only deserving businesses and then phasing out these perks, as well as replacing the 5% gross income tax rate with a reduced CIT rate of 15%;

• The third package, to yield P40-billion net collections, will reduce rates for estate and donor taxes and transaction charges on land ownership transfers (documentary stamp tax, transfer tax and registration fees), to be offset by additional collections from rationalizing valuation of properties, increasing valuation closer to market prices and adjusting valuation every three years;

• A fourth package, which will result in a cumulative P1-billion foregone revenues, will reduce the rate of tax on interest income earned on peso deposits and investments to 10% from 20% currently, as well as harmonize capital income tax rates for dollar deposits and investments, dividends, equity and fixed income placements “towards 10%” and raise the tax rate for stocks traded on the Philippine Stock Exchange to 1% of gross selling price from 0.5% currently;

• The fifth package -- to be tapped when needed and which will bring in a total of P129.4 billion -- consists of new taxes on luxury items like cars, yachts and jewelry; fatty foods; lottery and casino earnings; a carbon tax; adjusted excise taxes on tobacco and alcohol products; and a new mining tax regime.

The draft bill containing a revised first package which the Department of Finance (DoF) submitted to the House of Representatives Ways and Means committee on Monday contained lower, restructured personal income tax that will cause revenues to be foregone, to be offset by higher excise tax on oil and petroleum products, a restructured excise tax on automobiles and removal of value-added tax exemptions.

Undersecretary Karl Kendrick T. Chua, DoF’s chief economist, told reporters on the sidelines of the forum yesterday that the department hopes for legislative approval of the first package early next year, for implementation in mid-2017.

By law, tax measures should emanate from the House of Representatives, although the Senate can hold parallel committee hearings in order to speed up those considered priority and just await House approval.

The revised lower personal income tax is now projected to result in P180 billion in foregone revenue, compared to P159 billion previously estimated, Mr. Chua said.

He added that the planned P10-per-liter excise tax on sweetened drinks will be packaged with the reformed “sin” taxes on alcohol and tobacco and will be submitted by the department to the House next year, saying: “It’s a package for a healthy Philippines.”

There are signs, however, that it will not be entirely smooth sailing for the Duterte administration’s planned tax reforms even in the House that it controls.

House Speaker Pantaleon D. Alvarez said over radio station dzMM yesterday that his chamber will not automatically approve higher or additional taxes and would like to see first how tax administration could be improved -- the tack employed for six years by the administration of former president Benigno S. C. Aquino III who stepped down on June 30.

Siguro tinatamad na lang sila upang mag-isip kung ano pa ‘yung mga magandang tax measures. Ito ‘yung mga pinakamadali siguro na gagawin. Napansin ko naman kahapon, wala namang provision doon na maga-address doon sa efficiency sa tax collection (Maybe policy makers are lazy in thinking of alternative tax measures. Maybe raising or adding taxes is the easier way to increase revenues. For instance, I noticed that there was no provision in the first package submitted to improve efficiency in tax collection),” Mr. Alvarez said.

Asked on the planned removal of VAT exemption for senior citizens, he replied: “The House of Representatives, hindi po ito magiging rubber stamp ng administrasyon. Hindi po natin papayagan na itong mga ganitong panukala ay aming palulusutin dito sa House of Representatives. (The House of Representatives will not be a rubber stamp of this administration. We will not allow these kinds of proposals to be approved here at the House of Representatives). -- LEPdG and RFJ