First tax package seen generating P1.16T in net revenues in next 5 years

Even as personal income tax rates will be brought down under the Duterte administration’s first tax reform package, the government stands to gain net revenues of P1.16 trillion in the next five years, the latest Department of Finance data showed.

If approved by Congress and implemented next year, the government will lose P141.4 billion from lower personal income taxes on top of foregone revenues of P3.1 billion from the reduction in estate and donor’s taxes.

On the other hand, the expansion of the value-added tax (VAT) base under House Bill No. 5636, which was approved by the Lower House last week, will generate P81 billion in fresh revenues.

The higher excise taxes to be slapped on oil products and vehicles, meanwhile, will add an additional P73.7 billion and P14.1 billion, respectively.

The P10-a-liter excise tax on sugar-sweetened drinks will generate P47 billion.

Improved tax administration will also add P43.8 billion to government coffers. The tax administration measures included in HB 5636 were the mandatory use of fuel marking, mandatory issuance of e-receipts, mandatory interconnection of large and medium firms’ point-of-sale machines and accounting system with the Bureau of Internal Revenue’s as well as the relaxation of bank secrecy for tax fraud cases.

Complementary measures approved by the Lower House such as the planned one-time estate tax amnesty will generate P6 billion next year.

An increase in motor vehicle user’s charge will also bring in P12.9 billion in additional revenues.

As a whole, the implementation of HB 5636 with the complementary measures will result in P133.8 billion in net revenues.

But had Congress not watered down the provisions on VAT as well as oil and automotive excise taxes, the net revenue next year should have been a higher P157.2 billion.

In 2019, net revenues from the first tax reform package will increase to P233.6 billion, P272.9 billion in 2020, P253 billion in 2021 and P269.9 billion in 2022.

The collections from new taxes will outpace the foregone revenues from reduced income tax rates, estimated at P155.5 billion in 2019, P172.1 billion in 2020, P227.1 billion in 2021, and P248.8 billion in 2022.

The net revenues from the first tax reform package will be equivalent to 0.8 percent of gross domestic product (GDP) in 2018, 1.2 percent in 2019, 1.3 percent in 2020 and 1.1 percent in 2021 and 2022.

Ahead of Congress’ adjournment, the House of Representatives passed HB 5636 on third and final reading, with 246 votes for, nine against and one abstention.

The DOF had said that the first out of up to five tax reform packages augured well to financing the massive infrastructure projects to be undertaken under the administration’s “Dutertenomics” thrust of “Build, Build, Build.” —BEN O. DE VERA