STATE revenue officials yesterday presented to lawmakers the general outline of a new tax regime that will ease the burden on wage earners and yet yield a net collection that will support plans for bigger government spending on infrastructure and social services.
In a briefing to the Ways and Means committee of the House of Representatives, which by law is where tax legislation emanates, Finance Secretary Carlos G. Dominguez III said: “We put the packages together so that there will be a balance between revenue-eroding measures and revenue-enhancing measures.”
Presentation materials showed the reforms will result in a total of P198.3-billion foregone revenues and overall gains of P566.4 billion to yield P368.1 billion in cumulative net collections.
The administration of President Rodrigo R. Duterte, who took office on June 30, last month submitted to Congress a P3.35-trillion national budget proposed for 2017 that is 11.6% more than the P3.002 trillion approved for this year. That plan will see public infrastructure spending increase 13.79% to P860.7 billion equivalent to 5.4% of gross domestic product (GDP) in 2017 from P756.4 billion, or 5.1% of GDP, this year. Tax revenues are targeted to grow 13.16% to P2.313 trillion in 2017 -- equivalent to 14.5% of GDP -- from this year’s programmed P2.044 trillion. Total state disbursements are programmed to increase 11.87% to P2.96 trillion in 2017 -- equivalent to 18.6% of GDP -- from P2.646 trillion this year. That will leave 2017 with a budget deficit of P478.1 billion, equivalent to 3% of GDP, from this year’s programmed P388.9 billion that is equivalent to 2.7% of GDP.
The summary presented to lawmakers yesterday bared five packages, namely:
• A proposal to cut personal income tax rate “to 25% over time, except for the highest income earners” from 32% currently, and other related reforms, will result in P159 billion in foregone collections that will be offset by P359.7 billion in gains from removing certain value added tax exemptions (P163.4 billion), increasing the excise tax on oil products and then pegging the rate to inflation from then on (P178.2 billion) as well as imposing an excise tax on sweetened drinks and pegging the rate to inflation (P18.1 billion) besides measures aimed at improving tax administration, to yield P200.7 billion in net collections;
• A reduction in corporate income tax (CIT) rate “to 25% over time” from 30% currently will result in P34.8-billion foregone revenues that will be partially offset by a projected P33.8-billion gain by streamlining tax incentives to make sure these benefit only deserving businesses and then phasing out these perks, as well as replacing the 5% gross income tax rate with a reduced CIT rate of 15%, to yield P1 billion in projected net foregone revenues;
• A reduction in the rates for estate and donor taxes and transaction charges on land ownership transfers (documentary stamp tax, transfer tax and registration fees) that will cost P3.5-billion foregone revenues that will be offset by additional collections totaling P43.5 billion from rationalizing valuation of properties, increasing valuation closer to market prices and adjusting valuation every three years, to yield P40-billion net collections;
• A reduction in the rate of tax on interest income earned on peso deposits and investments to 10% from 20% currently, as well as harmonizing capital income tax rates for dollar deposits and investments, dividends, equity and fixed income placements “towards 10%” and raising the tax rate for stocks traded on the Philippine Stock Exchange to 1% of gross selling price from 0.5% currently that will all result in a cumulative P1-billion foregone revenues;
• New taxes on luxury items like cars, yachts and jewelry (P7.7 billion), fatty foods (P20 billion), lottery and casino (P20 billion) as well as a carbon tax (P20 billion), adjusted excise taxes on tobacco and alcohol products (P58.2 billion) and a new mining tax regime (P3.5 billion) are all expected to bring in a total of P129.4 billion. -- L. E. P. de Guzman
source: Businessworld
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