DoF: Tax incentives remain under second tax reform package

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Department of Finance

By Arjay L. Balinbin, Reporter

The Department of Finance (DoF) clarified on Monday, May 28, that it is not the administration’s “thrust” to remove all the tax incentives of companies under the second package of the Tax Reform for Acceleration and Inclusion (TRAIN 2).

“For the locators of the Philippine Economic Zone Authority (PEZA), at first, they thought that all incentives will be removed, but as Assistant Secretary Paola A. Alvarez explained, it is not the thrust of the government. We will still retain the incentives, but we will change how these are going to be administered. So, it is important that it is performance-based, time-bound, transparent, and targeted,” Finance Assistant Secretary Maria Teresa S. Habitan said in a press briefing at the Palace on Monday when asked about the main concerns of private stakeholders regarding the second package of TRAIN.

For her part, Ms. Alvarez said the TRAIN 2 gets “positive” feedback from the “chambers of commerce.”

“It is because most of them are small and medium enterprises (SMEs). They are the ones who will benefit [from TRAIN 2], because it aims to lower [their] income tax,” she explained

The DoF, according to Ms. Alvarez, is confident that the proposed TRAIN 2 will be passed within the year, noting that the finance department is “in healthy talks with lawmakers.”

The official also said the DoF will not support the proposal to suspend the higher excise tax on fuel under the tax reform law. She said the revenues from oil excise tax will be used to fund the implementation of the free college education program this year.

“DoF does not support repealing of higher excise tax on fuel because funds to be collected from it to be used for funding free public tertiary education,” Ms. Alvarez said.

“We cannot just suspend TRAIN provisions because if we do, we would have difficulty funding our programs,” she added.

She stressed that under the TRAIN law, “if oil prices reach $80 per barrel, the government can suspend the next tranche of increase in the excise prices of oil in the succeeding years.”

The DoF also clarified anew that TRAIN is not solely to blame on the country’s rising inflation rate, saying the tax reform law’s impact on inflation is “only 0.4 percentage points.”

Other contributing factors, according to Ms. Alvarez, include “rising global prices of oil, devaluation of the Philippine peso partly due to heavy importation, and there are more people spending due to their increased purchasing power.”

For her part, Ms. Habitan said that with higher oil prices, “4.2 poor Filipino families are given unconditional cash transfer.”