Tax reform seen OKd in ’17

Hopes are high that the Philippines will be able to enact before the year ends a tax reform law that will generate enough revenues to support the Duterte administration’s massive infrastructure buildup program.

As all eyes are now on the Senate, which will begin deliberations on the package starting July 24 (Congress is on break from June 3 to July 23), economists are optimistic that the upper House will fine-tune the bill to be closer to the package supported by the Department of Finance.

“We understand the Senate version of the Tax Reform bill (Senate bill 1408) is closer to the original Department of Finance version of the bill (better revenues) and will be deliberated when Senate resumes session on July 24,” Citibroup said in a June 5 research note written by Hong Kong-based economists Johanna Chua and Gaurac Garg.
It said it was unclear how long the process would take but considering that it was already passed in the lower House, the bill could be approved earlier Citi had envisioned (Citi earlier projected legislation by late third quarter 2017).

New York-based think tank Global Source, in a separate research note dated June 2, said: “Events in the last few days have given us more confidence that the tax reform will hurdle the Senate before the year ends.”

When President Duterte certified the bill as urgent, Global Source said the CEO of the land had addressed the certification to the Senate as well, sending a categorical signal that he was backing this legislation.

“The Senate President reacted by filing a counterpart bill in the Senate (SB 1408), similar to an earlier bill filed by the chair of the House ways and means committee. We expect this to speed up Senate deliberations,” Global Source said.

“It is evident that Finance Secretary Dominguez not only has the President’s ear (most recently seen in the appointment of a career central banker as the next Bangko Sentral ng Pilipinas governor) but also the political savvy to get support for key priorities. We expect him to be able to sway key members of the Senate as well,” it added.

For its part, Citi said the lower House had passed a “better” version of the Tax Reform bill. House Bill 5636 lowers personal income taxes rates while removing some exemptions and imposing higher excise taxes on oil, car and sugar sweetened drink.