Congress ratifies tax reform bill

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Senators Joel Villanueva and Loren Legarda talk about the changes to the coal tax provision in the alleged unauthorized version of the bicameral report on the tax reform measure. Photo taken on Dec. 13. -- Photo: Arjay Balinbin

The Senate and the House of Representatives ratified the final version of the Tax Reform for Acceleration and Inclusion (TRAIN) bill on Wednesday, Dec.13, a day after the adoption and ratification of the proposed P3.77 trillion 2018 budget.

At the Senate, the tax reform measure was ratified with 16 affirmative votes, while four senators — Senators Panfilo M. Lacson, Paolo Benigno A. Aquino IV, Ana Theresia Hontiveros-Baraquel, and Antonio F. Trillanes IV — voted “no.” Senators Emmanuel D. Pacquiao and Francis Pancratius N. Pangilinan were not present at the session.

Meanwhile, at the House of Representatives, Rep.  Antonio L. Tinio of ACT-Teachers Partylist said the ratification was “invalid.”

“Tonight’s ratification of the TRAIN by the House of Representatives was a total farce and travesty of so-called representative democracy,” Mr. Tinio said.

“With barely 10 people on the floor and despite my very clear objections due to obvious lack of quorum, the presiding officer and majority floor leader proceeded to adopt the final report of the tax reform bill’s bicameral conference committee, copies of which were not even on hand. Since there was no quorum and no actual vote was taken, the alleged ratification is clearly invalid. The brazen railroading of this TRAIN wreck on the poor exposes yet again the blatant disregard  of the Duterte administration and its Supermajority in Congress  for even the most minimal standards of democracy,” Mr. Tinio added.

The tax reform measure, originally scheduled for ratification on Tuesday, Dec. 12, was delayed due to allegations the bicameral conference committee report was modified behind the scenes. The original report contained the amendment of Presidential Decree (PD) 972 or the Coal Mining Development Act of 1976, which had the effect of removing the tax exemption enjoyed by the coal mining industry for over 40 years, facilitating the imposition of a new excise tax.

Sen. Loren B. Legarda, who chairs her chamber’s finance committee, responded to the allegations as follows: “Let us take a stand on the integrity of the process. There should be no changes after the report is printed. There should be no “magic.” Nothing should disappear or appear.”

“The P50-P100-P150 excise tax on coal (for 2018, 2019 and 2020 respectively), which is currently P10 per metric ton for imported coal… The intention of the Department of Finance (DoF) was a level playing field because local coal under PD 972 was untaxed. There are suspicions that local coal is again exempt. The exemption was never discussed. And that’s just one company or one family,” she added, speaking in Filipino.

Semirara Mining and Power Corp. is the dominant domestic producer of thermal coal used in the power industry.

Sen. Joel Villanueva, who proposed to amend PD 972, also said: “At the bicameral conference committee for TRAIN, both Senate and House reports repealed PD 972… But it turned out, that was changed… The government will be losing five billion. There are now two versions of the bicam report, on repealing PD 972, the other continuing the exemption of locally produced coal. The latest version floating around is that excise tax will go through, but domestic producers will enjoy VAT exemption, which is weird.”

Asked where the unauthorized bicam report came from, Mr. Villanueva said, “It appears that it’s (from) the House contingent. So you have to ask who benefits? There is only one company that produces 95% of our coal.”

The bicam-approved TRAIN bill also raised taxes on petroleum products, while keeping to a minimum the increases in LPG, diesel, and gasoline taxes.

The excise tax on LPG for 2018 is P1, for 2019 P2, and P3 for 2020 onwards. Meanwhile, the diesel fuel will be taxed P2.50 per liter in the first year of TRAIN implementation, rising to P4.50 in 2019, and P6 in 2020 and after. Both LPG and diesel fuel are currently exempted from excise tax.

The excise tax on regular and unleaded premium gasoline will rise to P7 in 2018 from the current P4.35; P9 in 2019, and P10 in 2020 onwards.

The original proposal of the DoF was a uniform P6 increase per liter. House Bill 5636 provided for a phased implementation of P3-P2-P1 per year, while Senate Bill 1592 provided for a P1.75-P2.00-P2.25 increase.

The bicameral conference also inserted a safeguard provision that would suspend the increase if the Dubai crude benchmark exceeds $80 per barrel.

The bicameral report also authorized the DoF to require fuel marking to combat oil smuggling.

The excise tax on tobacco was also raised from the current P30 per pack. Starting January to June 2018, the excise tax will increase to P32.50; between July 2018 and December 2019, it will rise to P35. Between 2020 and 2021, the tax rate is P37.50, rising to P40 between 2022 and 2023. The tax will ratchet up 4% annually from 2023 onwards.

The bicam also agreed to allocate 70% of the yearly incremental revenue for five years to the government’s infrastructure program with 30% going to social mitigation measures such as investments in education, health, targeted nutrition, and anti-hunger programs for mothers, infants, and young children, social protection, employment, and housing that prioritizes and directly benefits both the poor and near-poor households. Arjay L. Balinbin and Minde Nyl R. Dela Cruz