The House of Representatives and the Senate are headed for a grueling bicameral conference for the first tranche of the Duterte administration’s tax-reform bill, as congressmen have started raising issues on the emerging Tax Reform for Acceleration and Inclusion (TRAIN) version of the upper chamber.
This could hurt the chances of the tax bill being signed into law by December, as targeted by the Department of Finance (DOF).
For one, Rep. Dakila Carlo E. Cua of the Lone District of Quirino, chairman of the House Committee on Ways and Means, said the lower chamber-approved P250,000 personal tax-exemption ceiling is nonnegotiable. His counterpart in the Senate, Sen. Juan Edgardo Angara, lowered to P150,000 the annual income that will be shielded from personal income tax (PIT).
“We will convince them to return the P250,000 annual personal tax exemption to help the public [by increasing their take-home pay],” Cua said on the sidelines of a news conference. “We would like to maintain our version because of the opportunity, so much energy, and political capital that we have invested.”
Under House Bill 5636 workers earning P250,000 a year will be exempted from paying the PIT. Senate Bill (SB) 1592, on the other hand, mandates that the first P150,000 annual taxable income will be exempted, plus a maximum of P100,000 additional exemption for those with up to four dependents.
“The public already suffered enough; let’s make it right to propel the economy,” Cua stressed.
‘Must emanate from House’
Cua also said they will make sure the Constitution’s mandate that tax bills must originate from the lower chamber is observed. This is in the face of new tax items being added by the Senate in its developing TRAIN version.
In the SB 1592, the Senate also proposed higher taxes on cosmetics, coal, foreign-currency deposit unit, capital trains of nontraded stock and dividends.
“All new tax measures must emanate from the House and, therefore, if there is a proposed new measure from the Senate, we will have to look into the legality of it,” Cua said. “We will talk about it because we want to come out with a package that will withstand [High Court ruling].”
The Senate Ways and Means Committee also endorsed adjustments in the excise-tax rates on petroleum products and sugar-sweetened beverages (SSBs)—but with a different formula.
Unlike the House version’s “3-2-1 formula”, spread out at P3 on the first year starting 2018, the senators opted to reverse the P6 tax hike schedule, as follows: P1.75 in the first year, P2 for the second year and P2.25 for the third year. The senators also retained the tax exemptions for kerosene.
Also, under the House version, beverages containing purely locally produced sugar shall be levied an excise tax of P10, with other sweeteners to be levied P20. On the other hand, the Senate version will tax SSBs via a two-tiered scheme: drinks with caloric sweeteners at P5 per liter and those with noncaloric sweeteners at P3 per liter in the first two years.
‘Our version is sound’
“Senator Angara and I haven’t talked about the details of their report. We have done our research, studies and the impact on the economy, industry and the consumers. I would like to propose to the other chamber to bring their notes so that we can discuss based on those parameters,” he added.
“Everything is subject to negotiation. But for me, I am convinced that our version is sound. I am not saying the Senate version is not good. However, they still need to convince us,” Cua added.
Veto
Cua is worried that President Duterte will just veto the tax-reform proposal if the Senate version will prevail. This is because the Senate version will only generate P59.9 billion in revenues, while the House bill will yield P119.4 billion, according to the DOF’s latest projection.
“The possibility is there; the President may always veto. If he sees it’s the wrong policy for the country, then he can always do so,” he said.
Increased borrowing
House Committee on Appropriations Chairman Karlo Alexei B. Nograles of Davao City said a big chunk of the 2018 budget is expected to come from the projected revenue under the House version of the tax reform.
With this, Nograles warned that the government will have to increase its borrowings if the House version is not adopted.
“[If the Senate version will be passed] we’re forced to increase our debt. The ball is in the hands of the House Committee on Ways and Means during the bicameral conference. [The committee will] fight for the desired projections because that was the basis when the budget was drafted and sent to the House,” Nograles said.
Peza perks
Meanwhile, major industry associations and members of the foreign business community are appealing to Congress to retain the zero value-added tax (VAT) provisions for locators of the Philippine Economic Zone Authority (Peza) under discussion in the Senate version of the tax-reform bill.
“A longtime challenge for some foreign investors is the requirement to pay VAT and then seek refunds. The government has a poor record of making these refunds. As revealed by Senator Angara in the Senate plenary discussion of the TRAIN bill, some P 30 billion in refunds are currently pending payment,” the group said in a statement.
SB 1592 said export sales are subject to zero-percent VAT rate. To be covered are:
■ The sale and actual shipment of goods from the Philippines to a foreign country;
■ The sale and actual shipment of goods to special economic zones and freeport zones;
■ Sale of raw materials or packaging materials to a nonresident buyer for delivery to a resident, local export-oriented company to be used in manufacturing, processing or repacking in the Philippines of the said buyer’s goods;
■ Sale of raw materials or packaging materials to an export-oriented enterprise whose export sales exceed 70 percent of production;
■ Those considered export sales under the Omnibus Investments Code of 1987 and special laws;
■ Sales of goods, supplies, equipment and fuel to persons engaged in international shipping or international air transport operations provided that these goods, supplies, etc., are to be used in the operations of international shipping and air transport.
With Catherine N. Pillas