Lower income taxes, expanded VAT coverage, higher excise tax on fuel in DOF proposal to House
Lower income taxes, expanded value added tax base, adjusted excise taxes on petroleum products and restructured excise tax on cars are part of the first package of tax reforms presented by the Department of Finance (DOF) to Congress.
In a statement, the finance department proposed reducing maximum personal income tax rate from the current 32 percent to 25 percent over time except for the highest income earners and shift to a simpler, modified gross system.
It also proposed widening the value added tax base by reducing coverage of its exemptions, excise tax on petroleum products and excise tax on automobiles, except for buses, trucks, cargo vans, jeeps, jeepney substitutes and special purpose vehicles.
This was part of the first package of tax reforms to Congress which aims to lower personal income tax rates while raising revenues to help fund the Duterte administration’s 10-point economic program for inclusive growth, the DOF statement said.
The finance department said the first of four sets of tax reforms was submitted to the House committee on ways and means chaired by Rep. Dakila Carlo Cua on Monday morning.
Finance Secretary Carlos Dominguez III has pointed out tax reform is crucial to reconfigure the Philippine economy to attain the Duterte administration’s goal of inclusive growth.
A quarter to a third of the net gain from the proposed tax reforms would go to conditional cash transfers, lifeline electricity subsidies, direct discounts and higher Philippine Health Insurance Corp. (PhilHealth) coverage, among other targeted subsidies for the sectors to be affected by the new fuel prices arising from the adjustments in the excise tax on petroleum products, the statement said.
Dominguez said the DOF-proposed tax reforms is the linchpin of a broader reform package by the Duterte administration to attack generational poverty, restore peace and order, curb armed insurgencies, transform the Philippines into a high middle-income state and lift 10 million Filipinos from poverty by the end of the Duterte presidency in 2022.
“Without reforming our tax system so that it becomes fairer, simpler and more efficient, government cannot undertake the volume of spending required in achieving our goals” of reducing poverty from 26 percent to 17 percent in six years and elevating the Philippines to the status of a high-income country in one generation,” he said.
A comprehensive tax reform package that includes other measures will also augment the P1 trillion in investments needed to transform the country into a high-income economy in one generation or by 2040.
The finance chief has said the two benchmarks to make the year-2022 goals of the Duterte administration achievable are sustaining annual economic growth at 7 percent, and preventing law enforcement from becoming so weak and the judicial system so corrupt.
“This is not a pipe dream. The medium- and long-term goals are eminently achievable. There is one benchmark we need to consistently attain year after year: this is to keep growth at 7 percent for the next generation,” Dominguez said.
Dominguez said the government plans to massively invest in infrastructure, human capital and social protection to achieve inclusive growth, which would require robust revenue inflows. DMS
