MORE ECONOMIC REFORMS have gained ground in the House of Representatives, with the measure removing restrictions on foreigners from practicing their professions in the Philippines and another simplifying taxes on financial instruments both bagging second-reading approval last Wednesday evening.
PROFESSIONALS AND SMES
House Bill No. 300, which amends Republic Act No. 7042, or the Foreign Investments Act (FIA) of 1991, “[a]ims to exclude the ‘practice of professions’ from the coverage of the Foreign Investments Act so as to attract foreign professionals to practice in the Philippines wherein they would be able to bring in technology and know-how from abroad and attract foreign direct investments, and help generate more employment opportunities in the country.”
The same measure — authored by Tarlac 2nd District Rep. Victor A. Yap — also reduces to 15 from 50 currently the minimum number of direct local hires required of foreign investors looking to establish small- and medium-sized enterprises (SMEs) with minimum paid-in capital of $100,000.
“… [O]perationally speaking, a small- and medium-sized enterprise cannot immediately sustain a labor force of 50 employees. Thus, there is a need to lower the threshold of employment requirement to 15 direct local hires,” the bill’s explanatory note read.
Counterpart bills — Senate Bill No. 418 and 419 — have been filed anew in the Senate by Senators Francis N. Pangilinan and Sherwin T. Gatchalian, respectively.
The measure nearly made it out of the 17th Congress after it bagged final approval in the House in January, but failed to secure third-reading passage in the Senate ahead of the June 3 adjournment.
The proposed FIA amendment is among priority measures which the Cabinet economic development cluster wants approved in the first regular session of the 18th Congress, which closes on June 5 next year.
It was also on the wish list of measures which 14 local and foreign business groups submitted to the Office of the President and both chambers of Congress last month.
ANOTHER TAX REFORM
Also approved on second reading last Wednesday was House Bill No. 304, or the proposed Passive Income and Financial Intermediary Tax Act, which makes up the fourth package of the government’s comprehensive tax reform program.
The bill — authored by Albay 2nd District Rep. Jose Ma. Sarte Salceda — proposes a unified 15% income tax rate on interest, dividend and capital gains from the current range of zero to 30%.
It also proposes the reduction of the stock transaction tax rate to 0.1% from 0.6% currently, and imposition of a 0.1% transaction tax on debt instruments listed and traded at the Philippine Dealing System.
The bill also removes the tax on initial public offering; imposes a five percent uniform gross receipt tax on banks and other financial intermediaries; and reduces the levy on health insurance, pension and pre-need insurance to a two percent premium tax from the current 12% value added tax (VAT).
Non-life insurance, however, will remain subject to VAT, while crop insurance will be VAT-exempt.
Amendments to the original version of the bill so far include:
• dividends received by a domestic corporation from another domestic firm will not be subject to tax;
• exemption from document stamp tax (DST) of non-monetary documents like diplomas, transcripts of records and other school certifications; oath of office for barangays, good standing certification from the Professional Regulation Commission, affidavits, certificates of no marriage record, baptismal certificates and marriage license certificates.
The government has so far enacted Republic Act No. 10963, which slashed personal income tax and increased or added levies on several goods and services; RA 11213, which offers estate tax amnesty and amnesty for accounts that remained unpaid even after being given final assessment and RA 11346 which gradually increases the excise tax on tobacco products and slaps a levy on vapor products.
Proposed tax reforms awaiting legislative approval include one that will cut the corporate income tax rate to 20% by 2029 from 30% currently and remove redundant fiscal incentives, as well as another that sets a uniform framework for real property valuation and assessment. — V. A. C. Ferreras