LEGISLATORS and techno-crats from the Department of Finance (DOF) and the Bureau of Internal Revenue (BIR) will meet on Tuesday to try to give flesh to the proposal to recalibrate the tax structure.
House Committee on Ways and Means Chairman Rep. Dakila Carlo E. Cua of the lone District ofQuirino said the reform proposals, which include measures lowering the individual and corporate taxes, is a committee
priority measure.
“There is a scheduled organizational meeting on Tuesday. We expect to receive briefings from the BIR, DOF, BOC [Bureau of Customs] and the BTr [Bureau of the Treasury]. We also expect to receive a brief on the income-tax reform proposals from the DOF,” Cua told the BusinessMirror.
“[However] I am not sure if they will already bring their [tax reform] draft bill,” he added.
Earlier, the DOF said it will submit to Congress the agency’s version of the tax-reform measures this September.
Finance Secretary Carlos G. Dominguez III said to attract foreign direct investments, the government should reduce the corporate income-tax rate from the current 30 percent to 25 percent.
He said the individual income- tax rate should also be lowered to 25 percent from the 32 percent.
The Cabinet-level Development Budget and Coordination Committee previously proposed the elimination of certain exemptions from the value-added tax (VAT) and impose higher rates on sugar products, fatty foods and petroleum products, and the rationalization of fiscal incentives instead to make up for the estimated P173.8 billion foregone revenues from the proposed lowering of individual and corporate tax rates.
The DOF said P18 billion is expected from the imposition of higher tax on sugar products and fatty foods.
The government also intends to more than double the excise tax on petroleum products from the current P4.35 per liter to P10 per liter. This was expected to bring additional revenues of P178 billion.
For the rationalization of fiscal incentives, the government will get P33.8 billion as additional revenues.
Meanwhile, the Congressional Policy and Budget Research Department (CPBRD), in a policy brief, said the government should study carefully the proposal increasing the excise tax on petroleum. It added a change in tax structure produces a change in consumer behavior.
The emerging proposals to adjust excise tax on petroleum products are premised on the fact that most of the rates were set as early as 1996.
“Several considerations must be taken into account in the process of reforming the tax system. One, the country’s excise tax must be comparable with those of Asean member-states. Two, increase in the price of basic commodities as a result of higher taxes could diminish the purchasing power of consumers,” it said. While diesel is excise-tax free in the Philippines, other Asean member-states impose specific tax or ad valorem tax rates on the same product.
In particular, the peso equivalent of the excise tax on diesel in Malaysia and Thailand are P31.97 and P3.19, respectively. Prior to the enactment of the Reformed VAT or Republic Act 9337, diesel was taxed at P1.63 per liter.
“Three, petroleum products are essential inputs to the production, processing and movement of goods. The transport sector uses up more than two-thirds of total petroleum products, followed by commercial and industry sectors. Four, importers and refiners of oil products are subject to VAT, in addition to excise tax. Being a price-based tax, the VAT automatically responds to inflationary changes, which the specific excise tax is not able to capture” such changes, the policy body said.
As reported by the Department of Energy, 68 percent of total oil consumption goes to the transport sector, 11 percent to commercial and 9.3 percent to industry.
Another important consideration is the impact of an excise-tax increase on goods and services, the CPBRD added.
“[To address this], the government must design well-targeted social protection—preferably direct subsidy—to mitigate the impact of additional taxes on poor households,” it said.
The CPBRD also said incremental revenues from excise tax on petroleum products may be used to boost infrastructure spending, upgrade mass-transport system and improve traffic management, among others.
“On the positive side, incremental revenues from higher tax rates will help the government to address the unmet needs of the Filipino people. Also, higher fuel price could result in more prudent use of petroleum products, longer service life for roads and bridges, traffic decongestion and lower carbon emission,” it said.
For his part, Deputy Speaker Rep. Romero S. Quimbo of the Second District of Marikina City, former chairman of the House Committee on Ways and Means, said the government and Congress should carefully study the sector they want to tax.“I’m not in total agreement with excise tax. I think we need to be very careful and be very precise in targeting the sector we want to tax. Remember that this measure is being pursued as a compensating measure for revenue loses resulting from income tax lowering. That’s the only justification I can see to support it,” Quimbo said in a text message to the BusinessMirror.