DOF files tax reform package, seeks reduction in income tax

The Department of Finance (DOF) on Monday submitted to the Lower House bills comprising the first package of its proposed tax policy reform program, which will slash personal income tax rates but raise excise rates slapped on oil products as well as vehicles.

In a statement, the DOF said the first of the four packages included the following: restructuring the personal income tax system; expanding the value-added tax or VAT base by reducing exemptions; raising excise taxes on oil products; and restructuring the excise tax on automobiles, save for buses, cargo vans, jeeps, jeepney substitutes, special purpose vehicles as well as trucks.

For the personal income tax regime, the DOF said the reforms included “adjustments in the income tax brackets to correct so-called income creeping; reduction in the personal income tax maximum rate to 25 percent from 32 percent, except for highest income earners; and shift to a simpler, modified gross system.”

Finance Secretary Carlos G. Dominguez III had said the plan was to impose a higher personal income tax rate of 35 percent for the “ultra rich” earning P5 million or more a year.

But Quirino Rep. Dakila Carlo Cua, who chairs the House committee on ways and means, told reporters it may be more difficult to pass a package, such that the DOF should instead pitch the measure aimed at lowering income tax rates and the other revenue-generating legislation separately.

The tax reform proposal may also have take a backseat to Congress’ ongoing plenary deliberations on the proposed P3.35-trillion 2017 national budget.

On the sidelines of the budget deliberations, Cua said that while the DOF already submitted the tax reform package to his office, he has yet to look into the details.

The bills will be referred to the ways and means committee, and then for discussion at the plenary, which is currently tackling the 2017 national budget.

Cua said the DOF’s proposals would not necessarily be prioritized, as they would be consolidated with the the pending bills earlier filed by other legislators.

He noted that also pending in the Lower House was similar legislation aimed at lowering income tax rates as well as generating more revenues for the government.

Cua said he would prefer that Congress have parallel discussions on the revenue-losing and revenue-generating measures instead of them being lumped together.

The DOF wants a comprehensive tax reform package passed so that the government would not bleed as a result of foregone revenues from lower income taxes.