The Department of Finance (DOF) has rejected a Senate proposal to reduce the value- added tax (VAT)—from 12 percent to 10 percent—prompting senators to instead consider options to push for “lesser exemption” from VAT coverage.
This even as Sen. Juan Edgardo M. Angara, finance committee chairman, assured on Wednesday the Senate version would meet the Duterte administration’s revenue target from proposed reforms in the VAT system.
Angara affirmed the Senate’s version of the Tax Reform for Acceleration and Inclusion (TRAIN) embodied in Senate Bill 1592, which, he said, is projected to yield a P159.5-billion revenue take, even surpassing the P59.9-billion initial revenue estimate.
“We were able to meet the revenue target using the more comprehensive and accurate data that the DOF has provided the committee after the filing of the committee report,” the lawmaker said.
Angara added the boost in revenue was sourced from the amendments to the provisions on the expansion of the VAT base. “From the repeal of certain VAT special laws alone, the estimated revenue gain is raised from P14 billion to P45.5 billion,” he said.
Angara added, “Another major source of revenue is the doubling of the prevailing documentary- stamp tax rates, which will approximately yield P40 billion,” from tax on documents, instruments, loan agreements and papers evidencing the acceptance, assignment, sale or transfer of an obligation, right or property.
This includes stamp tax on bank checks, which will be doubled from P1.50 to P3; on original issue of shares of stock, P1 to P2; sales or transfer of shares of stock, P0.75 to P1.50; certificates of profits or interest in property or accumulations, P0.50 to P1; among others.
According to Angara, the stamp-tax rates are “already due for updating, since such rates were set two decades ago just like our income- tax rates.”
“This increase in stamp-tax rates will also improve the progressivity of the tax-reform package, as this will mostly affect the rich, who have the ability to pay additional taxes,” Angara said.
The Senate ways and means committee, he added, had sought to come up with a version of the TRAIN bill that would raise the take-home pay of Filipino workers by providing tax relief to 99 percent of individual income taxpayers and, at the same time, meet the revenue target so as not to impair the government’s capability to finance its programs and projects.
At the same time, the Senate version of the tax-reform measure also provided more specific earmarking provisions so that revenues will be allocated to programs that will directly benefit the poor.
Angara cited the funding for the free college law, unconditional cash transfer for the bottom 50 percent poorest households, free medicines for poor families and feeding programs in areas with high incidence of hunger, infrastructure programs to address congestion and improve mass transport, among others.
During the plenary deliberations, Sen. Panfilo M. Lacson Sr. proposed the amendment to reduce the VAT rate from 12 percent to 10 percent, saying the economy is improving, with GDP growth at 6.9 percent.
But even as he batted for VAT-rate reduction from 12 percent to 10 percent, Lacson said there will be an upward adjustment in incremental revenue he estimated to add up to over P117 billion.
“Why? Because among Asean [Association of Southeast Asian Nations] member-states, the Philippines has the highest VAT rate. Thailand is only 7 percent.” Lacson said.
He added: “But then, we are swamped by VAT exemptions and earmarking,” as he noted that total number of exemptions add up to 143.
“We have the biggest number of VAT exemptions…so what I will do is move for lifting exemptions so they have long benefitted from it, some dating back to 1992,” the senator said.
“It’s about time they should give back to the Filipino taxpayers. So, we will pay a 10-percent VAT rate, yet incremental revenue will be bigger, estimated to generate P117 billion,” Lacson added.