Not all tax reforms approved by yearend

By Elijah Joseph C. Tubayan
and Charmaine A. Tadalan
Reporters
REMAINING TAX REFORMS targeted by the Executive will bag final approval in the House of Representatives this 17th Congress, a leader of the chamber assured on Monday, but not all will hurdle both legislative chambers by yearend as President Rodrigo R. Duterte (PRRD) requested in his third State of the Nation Address (SoNA) last July.
The Executive had submitted all tax reform packages to Congress in July in hopes of securing legislative approval by Dec. 14 — when lawmakers go on their Christmas break — since legislators are expected to increasingly be taken up with preparations for the May 2019 mid-term elections towards yearend.
Newly installed House Ways and Means panel Chairman Rep. Estrellita B. Suansing of Nueva Ecija’s first district told reporters on Monday that she is committed to securing final approval of all tax reforms “before my term ends and before Speaker’s (Gloria M. Arroyo’s) term will end” on June 7 next year, the last day of the 17th Congress.
“We have six bills pending, we have six months to go… at least one bill should be passed in the House (on) third and final reading every month,” Ms. Suansing said.
Sought for comment, Presidential Spokesperson Harry L. Roque, Jr. sidestepped a question on Mr. Duterte’s request for yearend approval of all tax reform tranches, replying in a mobile phone message: “We’re very happy for the support the Committee gave to this administration initiative.”
Sought separately for comment, Finance Undersecretary Karl Kendrick T. Chua said only that “consistent with PRRD’s SoNA, we hope Congress can pass all tax reform packages ‘in succession’.”
Only the first package has been enacted so far: Republic Act No. 10963 or the Tax Reform for Acceleration and Inclusion Act (TRAIN) that slashed personal income tax rates but increased or added taxes on a host of items besides scrapping value added tax exemptions.
Still awaiting plenary approval in the House is the second package — the Tax Reform for Attracting Better and High-quality Opportunities (TRABAHO) bill — which reduces the corporate income tax rate gradually to 20% from 30% currently and removes redundant fiscal incentives that have been costing the economy billions of pesos in foregone revenues yearly, among other measures.
The other proposed reforms include a general tax amnesty, further increases in tobacco and alcohol excise tax rates, a bigger government take in mining revenues, adoption of a uniform valuation scheme for real property taxes at the local level and streamlining of taxes on passive income, among other measures.
NEW MINING TAX ‘PUNISHING’
The House on Monday began committee-level discussions on the tax bills designed to give government a bigger share in revenues of miners, who opposed both measures.
The Ways and Means committee started deliberations on the Department of Finance (DoF)-backed House Bill No. 7994, which seeks to impose a uniform royalty equivalent to five percent of miners’ gross output on top of all other national and local taxes.
It also discussed House Bill 422, which seeks to impose a 10% tax on miners’ gross revenues, or a 55% levy on their adjusted net mining revenue — defined as gross revenue less production and other deductible costs, but not to exceed 10% of direct mining, milling and processing costs — whichever is higher, in lieu of all national and local taxes except for taxes on real property, value added, capital gains, stock transactions, documentary stamps, donors, and other fees.
“We will get ‘yung magagandang (the good) provisions; we will consolidate the two bills,” she said. “We want to finish the technical working group (meetings) this week so that makalabas na kami ng (we can come up with the) committee report. If there is a committee report this week then baka in two weeks time nasa (the measure will be with the) plenary na.”
The DoF expects HB 7994 to generate a P1.83-billion incremental revenue in the first year of implementation.
Ms. Suansing said both bills address Executive Order No. 79, signed by Benigno S.C. Aquino III in 2012, as the new revenue-sharing scheme will allow the Executive to lift the moratorium on new mining contracts.
The Chamber of Mines of the Philippines (CoMP) opposed both bills during the hearing, saying taxes on the industry are already “very heavy,” as levies on minerals have just been increased by TRAIN, which took effect last January.
“We were hoping that the four percent was enough… It would be too much of a burden and would make our country’s tax structure uncompetitive. The total tax will be punishing,” said CoMP Executive Director Ronald S. Recidoro in an interview after the hearing.
He cited a 2012 International Monetary Fund study that the Philippines’ current mining tax is “already too high to attract quality investments that we need.”
Mr. Recidoro said that he would prefer a tax on net revenues, as the tax on gross would be “regressive” for miners given large up-front costs on heavy machinery, power and labor.
“The tax structure must be progressive. Base the tax not on gross, but on profit, such that when profits increase, tax rates go up. It’s more equitable,” he explained. “If profits go up then we’re okay with an increased tax rate, but there should be a commensurate deduction in tax rates when profits are low.”
But Ms. Suansing said: “they are earning in some months, some months they are losing. Ganun talaga ang negosyo (That’s business).”
Walter W. Brown, president and chief executive officer of listed Apex Mining Company, Inc., said in the same hearing that “[t]he imposition of the same tax regime for all types of mines should be amended.”
“Before we tax mines we should take a look at the cost structure… underground miners’ cost structure is much higher versus nickel miners. It should be subject to much more definitive study.”