By Jovee Marie N. dela Cruz and Butch Fernandez
The House of Representatives swiftly passed on Wednesday a bill seeking to reform the country’s tax regime, but its enactment would have to wait longer as the measure is expected to face rough sailing at the Senate.
Four months after it was introduced by the Department of Finance (DOF), House Bill (HB) 5636, or the Tax Reform for Acceleration and Inclusion (TRAIN), passed on third reading. A total of 246 lawmakers voted “yes”, nine voted “no”, while one abstained.
House Committee on Ways and Means Chairman and PDP-Laban Rep. Dakila Carlo E. Cua of Quirino said, “After all of the deliberations, I am very much convinced that this is a pro-poor package and we can trust the President that this will really help the lives of the Filipinos.”
The measure will be transmitted to the Senate for further scrutiny. HB 5636 was certified as urgent by the Palace on Monday.
With the passage of HB 5636, House Deputy Speaker Romero S. Quimbo of Marikina City said more than a million workers will no longer be required to pay income taxes.
“It’s a big relief to the ordinary worker who, for years, has been paying for almost all of the tax collection of the government. This we must celebrate! But the victory is bittersweet,” Quimbo said.
“While I voted in favor of HB 5636, I did so with deepest reservations because of the additional taxes on diesel, kerosene and LPG, which, unfortunately, will affect most the poor,” he added.
Quimbo urged the Senate to “carefully consider and revisit” the new taxes that will be introduced that will affect the poor.
“While the House has managed to reduce the originally proposed excise taxes on fuel, I believe that this is still not enough. I hope the Senate will fight to remove taxes on diesel, kerosene, and LPG,” he said.
Quimbo added the current tax- reform system approved by the House is “incomplete”.
“Without any reform on tax administration—curbing corruption in the bureaus of Internal Revenue [BIR] and Customs [BOC], new tax laws will not be effective in hiking government revenues,” he said.
Party-list Rep. Carlos Isagani Zarate if Bayan Muna said the tax measure will “definitely hit the poor hard” because it would mean higher prices of basic goods and services.
“Instead of lifting the tax burden, this [bill] further imposes additional burden on ordinary citizens,” he said. “President Rodrigo Duterte promised to ease the burden of Filipino citizens in paying income taxes. However, this is not the overall aim of HB 5636. HB 5636 is far from the promise of President Duterte,” Zarate added.
While it exempted those earning P250,000 yearly from income tax, Zarate said the bill removed the previous personal tax deduction, as well as the deduction to medical and health insurance. It will also impose taxes on the fringe benefits of workers. “The government stands to lose up to P152 billion in revenues by 2019 because of the adjusted income tax structure, but the government is seen to earn at least P320 billion through complementary tax reforms, such as excise taxes and removal of VAT exemptions that would be shouldered primarily by ordinary citizens, especially the poor,” he added.
Zarate said taxes, expenses and basic commodities will significantly increase for most Filipinos via higher excise taxes on petroleum products, particularly on LPG, diesel and gas, as well as sugar-sweetened beverages (SSBs). “According to the DOF, without tax reform, the people will likely remain poor. With regressive taxation, which mainly characterizes the tax reforms in HB 5636, the people will be poorer and burdened further,” he said.
Under the bill, workers earning P250,000 will be exempted from paying personal income taxes. Also, an 8-percent tax on the self-employed and professionals will now be imposed on gross receipts in excess of P250,000.
The measure provides automatic adjustment of taxable income levels and their corresponding base every three years beginning 2022, based on a three-year cumulative consumer price index inflation rate. The bill said the tax exemption for 13th- month pay and other benefits would increase from P82,000 to P100,000.
Assistant Minority Leader and Party-list Rep. Eugene de Vera of ABS proposed the grant of tax exemption for P100,000 worth of 13th-month pay and other cash benefits.
The proposal to lift expanded VAT exemptions for cooperatives was also scrapped after 150 congressmen opposed the removal of the incentive.
According to Cua, the lower chamber retained the VAT exemptions of cooperatives to “make the tax package pro-poor”.
Finance Undersecretary Karl Kendrick T. Chua said that, with the retention of cooperatives’ VAT exemptions, the government stands to lose P6 billion annually.
“For the co-ops, we estimate around P6 billion at least annually, not counting the unestimated leakage,” Chua said.
The bill also includes a P6 tax on petroleum products that could cause prices of basic goods to rise. The P6-per-liter excise-tax increase will come in three tranches of P3, P2 and P1, respectively, in three years starting 2018.
The measure provides new schedules and brackets for auto excise tax in the package. The DOF is pushing for the excise on vehicles to address traffic in the country.
Under the proposal, the excise tax will be implemented in two schedules. For the lower bracket, if the net manufacturer’s price/importer’s selling price is P600,000, the excise tax will be 3 percent by 2018 and will increase to 4 percent by 2019.
For the higher bracket, if the net manufacturer’s price/importer’s selling price is over P3.1 million, the excise tax will be P1,468,000 plus 90 percent of the value in excess of P3.1 million in 2018. For 2019, if the net manufacturer’s price/importer’s selling price is over P3.1 million, the excise tax will be P1.82 million plus 120 percent of the value in excess of P3.1 million.
Also, the bill provided that the SSBs will be levied an excise tax of P10 per liter of volume capacity, subject to a 4-percent yearly increase after January 1, 2018.
The bill said the lease of a residential unit with a monthly rental not exceeding P10,000 shall no longer be subjected to VAT exemptions. However, it called for the conditional removal of VAT exemption for socialized housing.
Under the bill, the removal of VAT exemption for socialized housing will now be conditioned upon the establishment of a housing voucher system, which should benefit buyers of socialized housing.
HB 5636 included provisions on e-receipts issuance and transmission, fuel marking, point-of-sale machines linkage to the BIR and linkage between the BIR and government agencies/bureaus/offices.
Cua said these address perennial tax administration problems, such as sales underdeclaration. The bill also imposes a 20-percent final income tax on the Philippine Charity Sweepstakes Office and lotto winnings.
Senators set more public hearings to further scrutinize the Duterte administration-endorsed revenue-generating measure TRAIN targetting to raise some P500 million from higher taxes.
Emerging from Wednesday’s Senate hearing on the Palace tax proposal, Sen. Juan Edgardo M. Angara, Ways and Means Committee chairman, said: “We need to hold more hearings [on the tax measure].”
“We are crunching figures because the impact of this tax measure will be harder on the poor sector.” Angara added, “as we need to cushion the impact of rising cost of basic needs.” The senator assured, however, the committee will work on the Palace money measure during the upcoming recess targeting to submit the TRAIN bill for plenary deliberations soon after Congress reconvenes regular sessions on July 24. “We are prioritizing the bill because it is a Palace-certified measure, but we need to
scrutinize the House version because of its impact on the public,” Angara added.
Senate President Pro Tempore Ralph G. Recto, however, indicated he will push for adoption of additional tax-relief measures to further mitigate the impact of the planned higher tax impositions.
Recto estimated that proposed mitigating measures are projected to add up to P200 million in income- tax relief, even as the government is looking to take back P500 million from the TRAIN bill revenues, “like giving 200 to one pocket but taking 500 from the other pocket”.
He said senators are also awaiting submission of details on so-called safety nets, like cash transfer, for the poor sector.
In the same interview, Recto confided the Palace-backed TRAIN bill’s early approval by Congress is likely to take some time, projecting plenary deliberations to “stretch until year-end”. “The earliest could be 2018,” Recto told the BusinessMirror. “The debates could stretch until December, so how can they implement it in January when there is still the