ADDITIONAL revenue to be generated under the Duterte administration’s proposed tax reform program will fund projects that will foster peace, according to the Department of Finance (DOF).
Increased taxes on sugar products and other fatty food, luxury cars and gambling, among other things would allow the government to provide subsidies to poor families in war-torn regions like the Autonomous Region in Muslim Mindanao, Finance Secretary Carlos G. Dominguez III said in a statement on Sunday.
The comprehensive tax reform package being firmed up by the DOF is targeted to generate P600 billion in revenue by 2019, of which P400 billion would come from new tax reform measures, the statement said. The rest would come from more effective efforts to curb smuggling and corruption in the Bureau of Customs, among other collection agencies.
The first tax policy package, targeted for passage next year, would reduce the maximum personal income tax 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.
Expand VAT base
To compensate for foregone revenues from the lower personal income tax estimated at P139 billion, the administration proposes to expand the value-added tax base by limiting exemptions to raw food and other necessities such as education and health; increase the excise tax on petroleum products and index it to inflation; levy a P5 per kilo tax on sugar products (domestic raw sugar, refined sugar as well as imported sugar and sugar substitutes); relax the bank secrecy in fraud cases, and include tax evasion as a predicate crime to money laundering.
A second tax reform package eyed for passage also next year would reduce the corporate income tax rate over time to 25 percent (from 30 percent at present) but target improved compliance, while rationalizing the fiscal incentives being given to investors.
A third package targeted for passage in 2018 would lower the rate of estate and donor’s taxes, as well as transaction taxes on land (DST, transfer tax and registration fees), while bringing the valuation of properties closer to market prices.
A fourth tax policy package, eyed for passage in 2019, would cut the tax on interest income earned on peso deposits and investment to 10 percent (from 20 percent at present). To compensate, the government plans to harmonize capital income tax rates for dollar deposits and investment, dividends, equity, as well as fixed income rates towards 10 percent, while also increasing the tax on stocks traded in the stock market to 1 percent on gross selling price from 0.5 percent at present.
Besides the four packages, other new revenue generating measures being eyed by the Duterte administration include a “fatty food tax”; luxury tax on cars, jewelry and yachts; mining taxes; carbon tax; casino and lottery tax; and revisiting the sin taxes on tobacco and alcohol products.