Tax reform package seen to jack up VAT rate

THE COMPREHENSIVE tax reform package that is now awaiting the President’s approval contains measures that will drastically ease the income tax burden of taxpayers while slapping new or higher taxes on consumption.

Last week, an opinion column published in the Inquirer by Peter Wallace of the Wallace Business Forum quoted Finance Secretary Cesar V. Purisima as suggesting “radical” tax reform, including raising the tax-exempt cap on incomes of individuals and small businesses, as well as reducing to 25 percent the corporate income tax ceiling from 30 percent at present.

But the easing of burden on income taxes would be compensated by increasing the value-added tax or VAT to 14 percent from 12 percent, and jacking up excise taxes levied on oil products, Wallace said, quoting Purisima’s suggestion.

Also a “dramatic” reform cited by Wallace was granting the Bureaus of Customs and of Internal Revenue autonomy from the Salary Standardization Law, in order to base the length of tenure as well as salaries of the two tax-collecting agencies’ employees on their respective performances.

Sought for comment, Finance Undersecretary Jeremias N. Paul Jr. said last Friday that “what [Wallace] described in his article is included in the tax reform package submitted to President Aquino.”

“[Wallace’s column was] not a complete description, but the key elements are there,” Paul said.

Separately, when Revenue Commissioner Kim S. Jacinto-Henares was asked last week about the Department of Finance’s (DOF) comprehensive tax reform package, she described it as a “holistic, not piecemeal” measure.

In general, the package would raise taxes slapped on some sectors while bringing down others, Henares said, without elaborating.

Earlier, Paul disclosed that the DOF was seeking the President’s approval of a comprehensive tax reform package—including policy measures, which shall entail legislation, as well as tax administration improvements—aimed at plugging revenue leaks expected in the medium-term.

The Bureau of Internal Revenue (BIR), for instance, had slashed its 2015 tax collections target—originally at P1.721 trillion—twice already due to recently approved revenue-eroding measures.

In January, the BIR cut this year’s goal to P1.704 trillion, citing the P16.9 billion in foregone revenues from the expanded exemption on workers’ de minimis benefits gained from collective bargaining agreement as well as productivity bonuses, as ordered by the Department of Labor and Employment last year.

Last February, the BIR again lowered its collections target to P1.674 trillion, as the law signed by President Aquino that brought up to P82,000 from P30,000 previously the tax-exemption ceiling on 13th-month pay and other bonuses was seen to result into revenue leaks worth up to P30 billion.