Despite some new measures being introduced to the first package of the Comprehensive Tax Reform Program (CTRP) by the bicameral conference committee on Monday, the Department of Finance (DOF) said the final version of the proposed Tax Reform for Acceleration and Inclusion (TRAIN) Act is seen to yield net revenue gains at a level that is closer to what the government wants.
According to Finance Secretary Carlos G. Dominguez III, the DOF has accommodated other provisions that were introduced by lawmakers in the reconciled version of the TRAIN bill.
“We did not propose [the new provisions] in Package One. However, we respect the right of the legislature to introduce taxes as they see fit. It’s part of the law, and we accept that,” Dominguez said on the sidelines of the Holcim Philippines Geocycle coprocessing tour in Norzagaray, Bulacan on Tuesday.
Measures that were inserted in the final TRAIN bill under the scrutiny of the bicameral conference committee include the increase in coal excise taxes, minerals, tobacco products and the inclusion of a tax on cosmetic procedures.
The increase in coal excise tax, which was originally proposed to be included in the DOF’s fifth package of the CTRP, was raised from the current P10 per metric ton (MT) to P50 per MT in the first year of implementation, P100 in the second year and P150 in the succeeding years.
The approved TRAIN version also proposes to double the tax rates for all nonmetallic minerals and quarry resources, and metallic minerals, including copper, gold and chromite to 4 percent. Increase in tobacco excise-tax rates was included in the final version of the bill, from the current P30 per pack, it will be raised to P32.5 in the first half of next year and to P35 starting from July 2018 to December 2019
A 5-percent tax was also slapped on procedures involving invasive cosmetic procedures, surgeries and body enhancements.
According to DOF estimates, the final version of the TRAIN is seen to yield the government net revenues amounting to an estimated P130 billion during its first year of implementation.
“The net revenue effect is certainly very close to the bill that was passed in the House. So we are very pleased that the legislature has given us the wherewithal to begin a really serious infrastructure program,” he added.
The DOF’s first package under the CTRP aims to slash personal income-tax rates from 32 percent to 25 percent, along with implementing other offsetting measures. Its original proposal which was submitted last September 2016, was seen to generate an estimated P157 billion in its first year of implementation.
House Bill 5636, or the TRAIN version of the House of Representatives, expects net revenues amounting to P134 billion, while Senate Bill 1592 estimates net revenues only amount to an estimated P59.9 billion.
The final version of the TRAIN bill was pointed out to be submitted for ratification on Wednesday (December 13). Majority Leader Rodolfo C. Fariñas Sr. of the First District of Ilocos Norte earlier pointed out that the Senate and the House have until December 13 to pass the tax-reform bill and submit it to Malacañang for President Duterte’s signature.
Fiscal policy-reform group Action for Economic Reforms (AER) said, however, that the TRAIN bill has veered away from the goal of the tax-reform measure which is to make the tax system “more simple, efficient and equitable.”
According to the AER, while it supports some of the measures embedded in the bicam-approved version of the TRAIN, including adjustment of the personal-income tax; raising mining taxes to 4 percent; and the increase in coal taxes; the overall bill “lacks structural changes” that will make the tax system “fairer and more equitable.” Among others, the group has pointed out that the increase on tobacco excise taxes of a mere P2.50 annually is “too small” to help reduce the consumption of the product defeating its purpose of being a health measure.
“With so many moving parts, we will only come to know the welfare and economic impact when TRAIN rolls next year,” AER said.