Duterte certifies tax reform package as urgent

The President has issued a certification of urgency that Congress pass the first tax reform package aimed at lowering personal income tax rates while slapping additional or new taxes on consumption, the Department of Finance said yesterday.

Finance Assistant Secretary Paola Alvarez said the certification was issued yesterday morning and was to be delivered to the House of Representatives, which is expected to pass House Bill No. 5636 on third reading at the plenary tomorrow.

HB 5636 is the substitute bill with “moderate modifications” containing the original DOF proposal under HB 4774 and 54 other measures, which will adjust personal income tax brackets to correct “income bracket creeping”; reduce the maximum personal income tax rate to 25 percent over time, save for the “ultra-rich” who would be slapped a higher 35 percent, and shift to a simpler modified gross system.

It will also broaden the value-added tax (VAT) base by cutting down on exemptions; increase excise taxes on petroleum, automobiles and sugar-sweetened drinks, and reduce the estate and donors’ tax rates.

Alvarez said the DOF was hoping the lower house would approve the first tax reform package before Congress goes on sine die break on June 2, such that when session resumes on July 24, it would be the Senate’s turn to discuss the measure.

Also, Alvarez said the DOF wanted the implementation of the new personal income tax rates by January next year, ahead of the implementation of the excise tax increases on oil, vehicles and sugary beverages. “We want taxpayers to feel the bigger take-home pay before the other tax increases,” she said.

In a statement, the DOF said Executive Secretary Salvador Medialdea, in his May 29 letter to House Speaker Pantaleon Alvarez, noted that President Duterte certified “the necessity of the immediate enactment of HB 5636 or the proposed Tax Reform for Acceleration and Inclusion Act (Train).”

“The benefits to be derived from this tax reform measure will sustainably finance the government’s envisioned massive investments in infrastructure, thereby encouraging economic activity and job creation, as well as fund the desired increase in the public budget for health, education and social programs to alleviate poverty,” President Duterte was quoted by the DOF as saying in a separate letter to Senate President Aquilino Pimentel III.

It was Finance Secretary Carlos G. Dominguez III who had made an appeal to President Duterte in an earlier memorandum “in the hope that the House of Representatives, from where all tax and budget laws originate, could pass the ‘Train’, which is the first package of the comprehensive tax reform program, before Congress goes on its sine die adjournment,” the DOF said.

“We believe that the President’s certification of the tax reform bill as an urgent legislative measure can help ensure timely and full passage of the tax reform package before the close of the session on June 2, 2017, so that the benefits of the reform can be felt sooner,” Dominguez told President Duterte.