WHILE the Senate has vowed to take its time in scrutinizing the tax bill approved by the House of Representatives on Wednesday, its leaders have already given indication that at least three main provisions of the measure would be retained.
These are the reforms in the existing income-tax brackets, the P6 diesel levy and additional taxes on luxury items.
Senate President Aquilino L. Pimentel III confirmed on Thursday that senators are working to reform the personal income tax, the revenue-depleting provision in the approved House Bill (HB) 5636, or the Tax Reform for Acceleration and Inclusion (TRAIN).
“Kailangan na po ’yun kasi lahat ng compensation income earners ay magkikita na po dun sa highest bracket,” the Senate chief told reporters. Pimentel pointed out that “even the richest man in the Philippines” is now ranked alongside middle-class income earners in the highest tax bracket.
“It is now time to reform that,” he said.
He also stressed that the rich are taking advantage of the low tax on diesel, “so we need to update that also. The proposal is P6 per liter, the imposition of which will be staggered under a P3-P2-P1 scheme.”
“We start at P3, then P2 plus P1, so P6 will still be the total. There are many strategies in tax law which we could implement.”
But the Senate President promptly clarified that “the key here is to calibrate, not to shock the entire system because of a big jump in the price of diesel.”
He added: “Luxury goods, it’s okay to tax them. If you can afford so much luxury, you should pay your dues to the government, which allowed you to enjoy luxury goods.”
At the same time, Pimentel III indicated that Congress is also finalizing tax-reform measures that will lift current exemptions, but did not go into details, which have yet to be finalized.
“You know, if you want a modern country, a modern society, a fairer society, we really have to have funds to improve our society,” he added.
Under HB 5636, 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. The House rushed the approval of the bill after it was certified as urgent by President Duterte.
Senators, however, said they will set more public hearings to further scrutinize the Duterte administration-endorsed revenue-generating measure TRAIN.
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.”
Senate President Pro Tempore Ralph G. Recto 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 publication requirement?”
Infra funding
Speaker Pantaleon D. Alvarez said expected revenues from the tax-reform measure will be used to fund infrastructure programs of
the government.
However, Nacionalista Party Rep. Luis Raymund F. Villafuerte Jr. of Camarines Sur, vice chairman of the House Committee on Appropriations, said government agencies, such as the Department of Public Works and Highways and the Department of Transportation, must work on upgrading their absorptive capacity to ensure the implementation of infrastructure programs of the government.
“The bill will extend programs to the poorest of the poor, where social benefits card will be given to every beneficiary,” Alvarez said.
Under the bill, for four years, an allocation of 40 percent of the yearly incremental revenues generated from the proposed petroleum excise tax shall be allocated to fund social-benefits programs and granting of fuel vouchers to qualified transport
franchise holders.
The measure also said that for the same period, the remaining yearly incremental revenues shall be allocated for infrastructure, health, education and social-protection expenditures.
Also, the measure said 85 percent of the tax collection from sweetened beverage excise tax shall be allocated for government priority programs, while
the remaining 15 percent shall be used to fund programs for the welfare and benefit of sugar planters/farmers. Villafuerte said the approval of the bill will equip the administration with a steady revenue flow “to go full blast on its ambitious “Build, Build, Build” agenda while eschewing the debt trap that has saddled past growth and
development programs.”
But Villafuerte said government agencies must improve their absorptive capacity to ensure the ambitious infrastructure buildup of the Duterte administration does not end up being hobbled by the slow implementation, if not nonimplementation, of big-ticket projects, as what had happened in the past administration.
“As far as I can recall, of the 60 public-private partnership [PPP] projects announced by the previous administration, only one was completed by the end of the Aquino presidency, which was the Muntinlupa-Cavite Expressway, or MCX.
This was quite disappointing, especially because Malacañang then had been touting the PPP as the flagship initiative of then-President Aquino,” he said.
“The tax-reform bill will help raise domestically a significant portion of the P8 trillion needed between now and 2022 for the government’s aggressive spending on infrastructure, instead of sourcing such revenues from borrowings that would only sink the present and future generations of Filipinos in a quicksand of debt.”
Workers oppose bill
The Associated Labor Unions- Trade Union Congress of the Philippines (ALU-TUCP) on Thursday chided the new tax-reform package, saying it will send millions of workers deeper into poverty.
In a statement, ALU-TUCP Spokesman Alan Tanjusay said once the TRAIN is enacted into law, around 30 million workers will become poorer.
“The impact of the proposed tax measure to
workers is not uplifting because those who are already poor workers would become even poorer. This bill is a big mistake committed by congressmen who approved it,” he said.
‘Don’t dilute bill’
But the Action for Economic Reforms (AER) have lauded the passage of HB 5636, pointing out that the necessary reforms in the personal income tax, fuel and automobile excise taxes adjustments and removal of exemptions in the value-added tax (VAT) will truly benefit the Filipino people.
According to AER senior economist Jo-Ann L. Diosana, the group will remain vigilant so the TRAIN bill will not be further diluted when the Senate committee tackles the bill. HB 5636 contains the first package of the Department of Finance-proposed Comprehensive Tax Reform Program. “The bill contained compromises, such as, allowing the VAT exemption of cooperatives and the
nonindexation of excise taxes on fuel and automobiles. We believe that should be corrected in the Senate deliberation of the bill. We will continue to be vigilant and make sure that the bill will not be further diluted and that the essential reforms will be secured,” Diosana said. With Jovee Marie dela Cruz, Jonathan Mayuga and Rea Cu
Image credits: AP Photo