By Charmaine A. Tadalan
Reporter
TWO tax reforms — one simplifying levies on financial instruments and the other raising the rate for cigarettes — advanced in the House of Representatives on Tuesday.
FINANCIAL INSTRUMENTS TAXES
The chamber approved House Bill No. 8645, or the “Passive Income and Financial Intermediary Taxation Act,” on second reading.
The measure simplifies the current system, which has 80 tax bases and rate combinations, by providing, among others: a 15% unified income tax rate on interest, dividend and capital gains, which currently ranges from zero to 30%; a five percent tax rate on gross receipts from the current 0-7% and removes distinctions according type, nature and maturity; standardizes at 0.75% the documentary stamp tax (DST)rate from the current 0-1% on the sale of original issue shares of stocks, bond, debentures, certificate of stock or certificate of indebtedness issued in any foreign country; and removes DST on sales, agreement to sell, memoranda of sales, delivery or transfer of shares or certificate of stocks, among others.
ADDITIONAL TOBACCO TAX HIKE
Also on Tuesday, the House Ways and Means Committee approved in principle the measure increasing excise taxes on tobacco products by P2.50 annually until it reaches P45 in 2022, and by four percent every year thereafter.
“Ang na-approve ng committee, rates for 2019, P37.50; 2020 is P40; 2021 is P42.50; 2022 is P45; and then four percent increase every year thereafter, starting 2023, every July,” committee chairperson Estrellita B. Suansing of Nueva Ecija’s 1st district told reporters after the hearing.
Despite the committee’s decision, the Department of Finance pushed its suggestion for the chamber ti adopt the version of Rep. Jose Maria Clemente S. Salceda of Albay’s 2nd district.
“We have to register our suggestion for you to consider, maybe in the plenary, the proposal of Cong. Salceda, that sends a path towards the P60,” Finance Undersecretary Karl Kendrick T. Chua told the panel on Tuesday.
House Bill No. 4575 proposed to increase excise taxes to P40-60 per pack in the first five years of implementation and a five percent annual increase thereafter.
“The other point, if you will go through your proposal, the alcohol indexation is seven percent, tobacco is four percent, maybe aligning to the seven percent would be something you can consider,” Mr. Chua also said, referring to the alcohol tax measure that was recently approved on second reading in the chamber.
For his part, JTI Philippines Managing Director Manos Koukourakis said tobacco products had already seen taxes rise under Republic Act No. 10963, or the Tax Reform for Acceleration and Inclusion Act (TRAIN) that took effect in January. TRAIN increased the excise tax on tobacco products to P32.50 from P30 in January 2018 and further increased it to P35 starting July 2019. Under the same measure, taxes are expected to go up to P37.50 in January 2020.
“As it is obvious, we are not happy to be the target of taxation all the time. Since 2012, our products have been taxed by almost +1,300%,” Mr. Koukourakis told BusinessWorld in a mobile phone message on Tuesday.
“Further, I personally believe in improving collections’ efficiency, expanding the tax base, rather than applying higher taxes… punishing those who pay; inadvertently, we favor those who don’t pay properly.”
The Senate on Monday began deliberation on Senate Bill No. 1599, authored by Senator Emmanuel D. Pacquiao, and SB 1605, authored by Senator Joseph Victor G. Ejercito, which proposed to increase the cigarette tax to P60 and P90 per pack, respectively. Mr. Pacquiao’s version is the counterpart of HB 6648 of Rep. Angelina D.L. Tan of the 4th district of Quezon.

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