DOF, tax experts submit reform proposals

The Department of Finance and tax managers have submitted to the Senate ways and means committee their respective tax reform proposals mostly aimed at lowering income tax rates.

The DOF’s proposed tax policy reform program presented to the Senate last Thursday has four main packages: Personal income tax and consumption; corporate income tax and incentives; property tax, and capital income tax.

The proposed policy packages, all constituting a bill that balances trade-offs, will allow the government to raise P600 billion or 3 percent of the gross domestic product in 2019 prices.

The first tax policy package, aimed for passage in January next year, will adjust to six the personal income tax brackets to correct so-called income creeping; reduce the personal income tax maximum rate to 25 percent (from 32 percent at present) over time, except for the highest income earners, and shift to a simpler, modified gross system.

To compensate for the foregone revenues from lower personal income tax rates estimated at P139 billion, the Duterte administration wanted to expand the value-added tax base by limiting exemptions to raw food as well as other necessities like education and health; increase the excise tax on petroleum products and index it to inflation; slap a P5-a-kilo tax on sugary products (domestic raw sugar, refined sugar as well as imported sugar and sugar substitutes); relax bank secrecy for fraud cases; and include tax evasion as a predicate crime to money laundering.

The second tax reform package eyed for passage in June next year will reduce the corporate income tax rate over time to 25 percent from 30 percent at present and simplify provisions to improve compliance, while rationalizing the fiscal incentives being given away to investors.

Sen. Juan Edgardo “Sonny” M. Angara, who chairs the Senate ways and means committee, described the DOF’s proposed tax policy reform program as “quite comprehensive and ambitious.”

“We will study the proposals carefully and await the submission of the draft bills and further details since what were presented were still broad outlines,” Angara said in a text message Friday.

For its part, the Tax Management Association of the Philippines (TMAP) said they were pushing for amendments to the Tax Code covering personal income tax, corporate income tax, estate tax and donor’s tax, among other amendments aimed at addressing “significant taxpayer issues arising from the sudden change in interpretation by tax authorities,” the group said in an Aug. 25 letter to Angara.

TMAP also wanted amendments to the Bank Secrecy law with tax amnesty; exemption from the Salary Standardization Law of employees of the bureaus of Customs and of Internal Revenue, as well as the repeal of the Lateral Attrition Law, and amendment to Republic Act No. 1125, which created the Court of Tax Appeals (CTA).

Specifically, TMAP said it was pushing for additional qualifications for those to be appointed as CTA justices “in order to strengthen the courts’ technical expertise, being a specialized court.”

TMAP was proposing that appointed CTA presiding justices and associate justices must have had practiced taxation law in the country for at least a decade or should have had obtained an accountancy degree. Ben O. de Vera