As President Duterte sign on Tuesday the so-called Package 1A of the Tax Reform for Acceleration and Inclusion (TRAIN) law amid protests from different sectors, the House of Representatives confirmed that lawmakers have vowed to pass “Package 1B” in the first quarter of 2018 to complete the first tranche of the administration tax-reform program.
To be known as the “amnesty pack-age,” Rep. Dakila Carlo E. Cua of the lone District of Quirino, chairman of the Ways and Means Committee, said Package 1B will include the estate-tax amnesty, a general tax amnesty and amendments to the bank-secrecy law.
“Yes, [there is a commitment from Congress to pass the bill] and that is the amnesty package,” Cua said in a text message. The amnesty package will also include adjustments in the Motor Vehicle Users Charge and automatic exchange of information.
Both houses of Congress are planning to pass the measure by the first quarter of 2018.
Currently, there are separate pending bills in the lower chamber providing the estate-tax amnesty, a general tax amnesty and amendments to the bank-secrecy law.
In an earlier statement, Finance Secretary Carlos G. Dominguez III said the amnesty package will cover one-third of the initial revenues to be derived from the first package of the Comprehensive Tax Reform Program (CTRP), which will the Duterte administration massive infrastructure plan.
The Department of Finance (DOF) said it is still computing the expected revenue gains from the amnesty package.
The Package 1A of the TRAIN Act, which is the first of five tax packages of the Duterte administration, is targeting to raise P130 billion in revenues.
Signing
Cua said Duterte is expected to sign the Package 1A today in time for the January 1, 2018. implementation. “I will be there. I was informed that Tuesday is the signing.”
Under the proposed TRAIN, workers earning P250,000 will be exempted from paying personal-income tax, while raising the 13th month pay’s tax-exempt ceiling to P90,000 from the current P82,000.
It also imposed excise tax on coal: P50 per metric ton for the first year, P100 for the second and P150 for the third.
The measure said the tax rates to be imposed on sugar-sweetened beverages are P6 tax per liter for juices and energy drinks and P12 tax per liter for beverages with high-fructose corn syrup.
It said the excise tax rates for all nonmetallic minerals and quarry resources and all metallic minerals, including copper, gold and chromite, will be doubled.
For automotives, an excise tax of 4 percent will be levied on vehicles costing up to P600,000; 10 percent for over P600,000 to P1 million; 20 percent for over P1 million up to P4 million; and 50 percent for over P4 million.
For oil and petroleum, the tax rates to be imposed are P3 for kerosene, P2.50 for diesel and P1 for LPG. All petroleum products that are being used as input, feedstock, raw materials for petrochem and refining, or as replacement fuel are exempt.
The measure also eases the rates of estate and donor’s taxes by imposing a unitary tax rate of 6 percent.
For tobacco, the excise tax will be raised from the current P30 to P32.50, effective from January 1, 2018, to June 30, 2018; to P35 effective July 1, 2018, to December 31, 2019; to P37.50 effective 2020 to 2021; to P40 effective 2022 to 2023; and 4-percent annual increase after.
It said cosmetic procedures, which include surgeries and body enhancements, will be taxed by 5 percent.
For housing, it will be status quo for three years, then the Senate version after. The Senate version defines socialized housing units as those constructed or sold at P2 million or less. With this, the TRAIN grants tax exemption for shelter units that fall under the definition of socialized housing.
Bad for underground economy
The Associated Labor Unions-Trade Union Congress of the Philippines (ALU-TUCP) said more than 15.6 million Filipinos in the underground economy are expected to suffer from additional taxes under the TRAIN.
In a statement, ALU-TUCP said workers in the informal sector will take the hit in the new taxes on SSBs and excise taxes on petroleum products. The group noted these workers are those not covered by labor standards and without social-protection benefits.
“Informal-sector workers working in the informal economy will be ran over by the TRAIN,” ALU-TUCP Spokesman Alan A. Tanjusay said. “Getting no direct benefits from the tax-reform package, these underground economy workers will fall further way below the poverty line.”
He added the TRAIN will contribute to the poverty of informal workers, and this will manifest in many forms, such as incapability to purchase basic needs. Informal economy workers, according to the ALU-TUCP, “are those independent, self-employed, small-scale producers and distributors of goods and services”.
These are mostly comprised of jeepney drivers, tricycle drivers, pedicab drivers, taxi drivers, sidewalk vendors, sales attendants, barbers, cooks, waiters, dishwashers in small-scale eateries, tailors, sewers, porters and street sweepers, among others. These workers, according to the group, are most vulnerable to the additional taxes imposed by the TRAIN.
‘Use veto power’
HealthJustice Philippines, a think tank and advocacy group with expertise in tobacco control and health promotion, expressed dismay over the TRAIN and called on Duterte to exercise his veto power.
“The incredibly low tobacco tax in TRAIN came as an unpleasant surprise. Clearly a handiwork of the tobacco industry, it appears to have been inserted at the last minute to forestall the efforts of advocates to push for a significantly higher tax rate, one that will truly be effective in discouraging tobacco consumption among the youth and low-income families,” said Dr. Jaime Galvez-Tan, board member of HealthJustice and former health secretary.
“We call on President Duterte to line veto the incredibly low tobacco tax increase inserted at the last minute in the TRAIN [Package 1A] bill. Mr. President, this will not save lives as tobacco products will remain affordable to our youth and low-income families. If we allow this, debilitating diseases, such as lung and throat cancers, will continue to rise. We implore your better judgment and not allow this travesty to happen. The commercial and vested interests of tobacco industry should not be permitted to sabotage the lives and health of the Filipino people,” Galvez-Tan emphasized.
Addressing the President, Galvez-Tan added, “As former mayor of Davao City, you were known for strictly implementing a smoking ban to protect the health of his constituents. You also openly condemned the dirty acts of the tobacco manufacturers, including their numerous attempts to bribe policy-makers and law enforcers with huge sums of money and extravagant gifts. We hope that this time, as President, you will demonstrate the same zeal in protecting the lives and health of the Filipino people by exercising your veto power to strike down the very low, ineffective and industry-sponsored tobacco tax rate in the TRAIN,” he added.
Dominguez said the total potential revenue that can be collected by the government from increases in coal excise taxes can amount to as much as P2 billion in its first year of implementation.
According to DOF Undersecretary Karl Kendrick T. Chua, excise tax collections on coal annually only amounts to around P300 million today. “[Excise tax collections on coal is] P300 million only, it’s small. It’s like P0.01 per kilogram…,” Chua told financial reporters.
The increase to P50 per metric ton on coal excise taxes under the TRAIN will translate to a tax of P0.05 per kilogram, according to the finance chief. “And now it will be P0.05 per kilogram [with potential revenue at] P2 billion,” Dominguez said.
The primary consumption of coal in the Philippines is for power generation, according to Chua. Broken down, 80 percent is for power generation, 15 percent to power cement plants and 5 percent consumed by the industry. The increase in coal excise tax was originally included in the fifth package of the CTRP.
With Rea Cu, Elijah Felice E. Rosales and Claudeth Mocon-Ciriaco