Reforms to offset foregone taxes–DOF | Inquirer Business

Reforms to offset foregone taxes–DOF

By: - Reporter / @bendeveraINQ
/ 12:58 AM October 28, 2016

The tax policy reform program being pitched by the Department of Finance is expected to plug the estimated P105 billion in foregone revenues yearly from tax perks that investors enjoy as well as a long list of value-added tax (VAT) exemptions.

“Among the primary goals of the DOF’s proposed comprehensive tax reform program is to plug these leakages and correct inequitable fiscal incentives by making the current tax system simpler, fairer and more efficient,” Finance Undersecretary Antonette Tionko said in a statement.

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“The DOF-proposed reforms also aims to correct the anomaly of the Philippines imposing one of the highest tax rates in Asia, yet having among the lowest revenue collections,” added Tionko, who heads the agency’s revenue operations group.

According to Tionko, “the government plans to increase revenues by correcting inefficiencies and inequities in the system and by expanding the narrow tax base,” citing that the tax take from the Bureau of Internal Revenue’s (BIR) 2,300 biggest taxpayers already account for half of the country’s entire revenue base.

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The first package of the proposed tax policy reform program will bring down personal income tax rates but will also trim the number of VAT exemptions, which the DOF deemed “prone to abuse,” to compensate for lower income taxes.

“We estimate that we lose about P5 billion on leakages from the exemptions granted to senior citizens,” Tionko said.

“Instead of using an inefficient and leakage-prone VAT system to address the needs of the poor and the vulnerable, we’re thinking that it would be more prudent to increase the coverage of social protection, perhaps through targeted cash transfers or higher pensions,” according to Tionko.

Also, Tionko said the government loses about P100 billion annually from the fiscal incentives given away to investors.

“Foregone revenues are estimated at almost P50 billion pesos per year on income tax holidays, and another P50 billion pesos in the special rate regime among large firms,” Tionko said, blaming these on “a fiscal incentive system that is not time-bound, which, in turn, has led to severe inequity.”

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