CONGRESS is free to modify tax reform package 2 beyond the Department of Finance’s (DoF) own recommendations, adding an element of unpredictability to the revenue potential of the bill, Secretary of Finance Carlos G. Dominguez III said.
“We have no choice. I mean just like (package 1) we will make a case for it, then they will decide how we will move forward,” he added.
When Republic Act No. 10963, the first package of the tax reform program, was still in legislation, the House of Representatives inserted the excise tax for sugar-sweetened beverages — which was not in the Finance department’s original proposal — along with other insertions modifying the list of value-added tax exempt sectors.
The Senate meanwhile included a new tax on cosmetic procedures, while raising rates for coal, minerals, tobacco and on some passive income taxes.
Along with the tempering of rates in other revenue-raising measures such as the fuel and automobile tax hikes, legislation brought the tax reform’s incremental revenue to P82.3 billion in the first year of its implementation, from P206.8 billion estimate in the DoF’s proposal when it submitted the bill in September 2016.
The DoF intends the second package to be revenue-neutral, meaning that it would not generate additional revenue for the government.
It aims to lower corporate income tax rate to 25% from 30% currently to attract investment, and at the same time plug losses and leakage by rationalizing tax holidays granted to firms, making them performance-based and time-bound.
Mr. Dominguez said that the department intends to submit package 2 to the Congress today as the regular session resumes.
“We should be ready by then. Because that’s when they open,” he said, noting that the department is “just putting the final touches on it.”
According to the constitution, all tax bills should originate from the House of Representatives.
The DoF said that foregone revenue from tax perks given to large enterprises totaled P301 billion in 2015, accounting for 2% of the economy. — Elijah Joseph C. Tubayan
