THE deputy speaker for finance at the lower chamber has filed the Department of Finance (DOF) version of the measures covering four tranches of the Comprehensive Tax Reform Program (CTRP).
In a statement, Deputy Speaker Luis Raymund Villafuerte of Camarines Sur said he filed House Bill 1909, which seeks to reduce the corporate income tax rate from 30 percent to 20 percent by 2029 and rationalize fiscal incentives. Villafuerte also filed HB 1908, which aims “to put in place a just, equitable and impartial” real property valuation system for local government units (LGUs) based on international standards.
He added that he also pushed HB 1907, which aims to encourage the development of the capital market “by making the tax system in the financial sector fairer, simpler, more efficient and revenue neutral.”
Villafuerte also filed HB 1906, further increasing excise taxes on alcoholic drinks and smoking alternatives, such as heated tobacco and vapor (vaping) products.
According to the lawmaker, these CTRP packages will broaden the revenue base, simplify and update the country’s complicated tax system and ensure the country’s long-term fiscal stability.
Villafuerte said the Philippines, for the first time ever, recently secured from Standard & Poor’s Global Ratings a credit rating of “BBB+,” a grade lower than an “A” rating. The latter is generally given to the world’s stable economies, he said.
Tax base
The lawmaker said his HB 1909, which represents Package 2 of the CTRP, “will widen the corporate tax base and plug its leakages, and help alleviate the burden on the business community, especially the micro, small and medium-sized enterprises.”
He said reforming tax incentives system should be “rationalized and disciplined and” is expected to attract investments that will deliver tangible benefits to the people.
In seeking to institute reforms in the real property valuation system, Villafuerte added these will correct inefficiencies that have hindered the growth of the country’s land sector.
Villafuerte, a former governor, said HB 1908, which constitutes Package 3 of the CTRP, seeks to implement the reforms in the system through the Bureau of Local Government Finance. The BLGF is tasked as the lead agency to review and approve the “Schedule of Market Values” (SMV) of all LGUs.
“With more than 23 national government agencies and 1,700 LGUs using different systems and methodologies, inefficiencies are sure to arise from the lack of a unified national standard,” Villafuerte added.
He said placing the task of reviewing the SMVs of local governments on the BLGF, which is under the DOF, will “separate the technical function of real property valuation from the political function of taxation practiced by local elective officials.”
Moreover, he said HB 1907 aims to simplify the 80 tax rates and tax bases in the financial sector to reduce costs, encourage transparent returns on investment, and develop the capital market “by adjusting, if not removing altogether, taxes that deter legitimate movement toward the initial public listing of companies.”
‘Sin’ tax
LIKEWISE, Villafuerte said an updated “sin” tax-reform law, as outlined in HB 1906, is necessary to discourage smoking and excessive alcohol drinking, especially among the youth, while raising revenues to completely fill the funding huge requirement for the Universal Health Care (UHC) program.
“Imposing higher excise taxes is still the most effective policy tool to affect prices to discourage consumption of sin products, in particular, among the youth and the poor who are the most sensitive to price changes,” the lawmaker said.
While the previous Congress raised taxes on cigarettes and introduced a new tax on heated tobacco products (HTPs) and vapor products, Villafuerte said the estimated revenues generated from this law will only amount to P15.7 billion in 2020, and a total of P129.9 billion from 2020 to 2024, which is not enough to close funding gap of UHC program.
He said the funding shortfall of the UHC program in 2020, the first year of its implementation, is an estimated P62 billion.
Expected gains
VILLAFUERTE said the additional revenues from his new sin tax reform proposal will “help sustain PhilHealth coverage for all Filipino families; improve accessibility and affordability to quality health care, and provide better outpatient benefit package, including checkup or consultation and medicines.”
The lawmaker said HTPs fall within the definition of cigarettes under Republic Act 9211 and, thus, should be taxed the same rates as cigarettes.
The health impact and safety of vapor products, has not yet been conclusively determined, according to Villafuerte.
“However, because of the established addictive effect of nicotine, we propose to increase the excise tax rates of vapor products to discourage consumption,” he added. “To prevent children and youth from consuming vapor products, variants with flavoring other than plain tobacco or plain menthol, are proposed to be prohibited.”
Earlier, House Committee on Ways and Means Chairman Jose Maria Clemente S. Salceda said his committee will start hearing the measure increasing and restructuring the excise tax rates on alcohol next week.