THE GOVERNMENT is confident the remaining packages of its tax reform program will encounter less obstacles in the 18th Congress that convenes on July 22, since they are generally less difficult than the first tranche, Finance Secretary Carlos G. Dominguez III said in a recent television interview.
“When we decided to do the tax reform, we decided to split up the measures and we decided to do the most difficult ones first,” Mr. Dominguez said in an interview that was aired on Cignal’s One News channel on Monday evening.
Mr. Dominguez was referring to Republic Act No. 10963, or the Tax Reform for Acceleration and Inclusion (TRAIN) Act, which reduced personal income tax rates and increased or added levies on several goods and services like fuel, sugar-sweetened beverages and cosmetic surgery.
Opposition to that first package was so significant that President Rodrigo R. Duterte acknowledged in March 2017 that it had undergone rough sailing in the House of Representatives and had to step in to push approval in the Senate. The package was diluted nevertheless when it finally became law.
Mr. Duterte also signed into law RA 11213, which grants estate tax amnesty and amnesty on delinquent accounts that remained unpaid after being given final assessment; while a bill that proposed to increase the excise tax on tobacco products gradually to P60 per pack by 2023 from P35 currently awaits his signature.
“The next measures are not going to be as difficult because they are measures that are meant to modernize our tax system rather than raise revenues,” Mr. Dominguez said in an interview in The Chiefs program.
Next in line among tax reforms is the proposed Tax Reform for Attracting Better and High-quality Opportunities (TRABAHO) bill that will cut corporate income tax rates gradually to 20% by 2029 from 30% currently, which is the highest in Asia. The same measure will also streamline the current fiscal incentive system, which has allowed some companies to enjoy tax perks for up to 40 years.
“Our incentive system is outdated. It is not transparent; it is not targeted, it is not time-bound. We think we have to modernize our system,” Mr. Dominguez said, arguing that tax incentives per se are not the sole deciding factor for investment decisions.
Mr. Dominguez recalled telling one investor that he could have a 20-year tax holiday and a P100,000 subsidy for every employee hired, provided he set up shop in Marawi City. The businessman declined.
Hence, Mr. Dominguez said, “It is more important to have peace and order, good infrastructure, good telecommunication, a very good workforce.”
The Finance department will also propose simplifying the current tax structure on capital income, which Mr. Dominguez also described ass “anti-poor.”
“We have a very complex system for capital income tax. We have 82 taxes applied to capital income, we want to bring it down 40,” he said.
He also explained that holders of peso savings accounts are now charged a 20% withholding tax, if less than five years. “If you have it over five years, there’s no tax. Who can hold a deposit for over five years?’ It’s not the ordinary wage earners. We want to make sure that we lower the withholding tax for savings, but tax everything the same,” Mr. Dominguez said.
“That should be very popular.”
The remaining packages also include proposals to centralize real property valuation and assessment; increase the government’s share in mining revenues as well as the excise tax rate on alcohol products.
Mr. Dominguez earlier this month assured new lawmakers that Filipinos are now supportive of tax reform, saying the stigma generally attached to tax measures did not seem to dent the election prospects last May 13 of those who supported the reforms.
Many lawmakers of the previous 17th Congress had been hesitant to be associated with tax reforms, drawing from the experience of Senate President Pro-Tempore Ralph G. Recto, who lost in the 2007 senatorial race after sponsoring the increase of value added tax to 12% from 10%.
Mr. Dominguez said that, seeing fairness and transparency in tax reform implementation, the public “did not punish, by not voting for them, those legislators who supported the tax reforms,” in the 2019 midterm elections.
For one, Senator Juan Edgardo M. Angara succeeded in his reelection bid despite sponsoring the TRAIN law. — Charmaine A. Tadalan