Overdue tax reform under way
Better late than later.
The adage can apply to the long overdue tax reform program that is finally under way.
As promised by President Duterte, he has certified the proposed comprehensive tax reform as a priority bill, prompting the House of Representatives to swiftly pass it to the Senate.
However, there are apprehensions from affected sectors regarding some provisions in the proposed tax reform bill called Tax Reform for Acceleration and Inclusion (TRAIN).
During the Tax Reform Forum organized by Finance Secretary Carlos Dominguez and Presidential Communications Operations Office (PCOO) Secretary Martin Andanar, along with other government and private partners on July 5, 2017, DOF presented TRAIN as a pro-people, pro-poor, pro-investment bill which aims to slash personal income tax rates, reform excise taxes on cars and fuel, and limit value-added tax (VAT) exemptions.
This is part of the administration’s 10-point social-economic agenda for high and inclusive growth that will ramp up infrastructure and social services spending in the country.
I laud the Department of Finance and its tax reform group led by Undersecretary Karl Kendrick Chua for all their hard work to push for a comprehensive tax reform.
As a tax reform advocate, I deem it necessary to discuss TRAIN without bias, including the DOF’s response to the anti-poor allegations and inefficient tax administration.
Usec. Chua shared his key messages regarding the tax reform package.
The tax reform when seen as a package provides benefits to 99 percent of Filipinos, he said.
And also, the tax reform is an investment in our future.
No investment is easy. There will be short-term challenges but everyone will benefit over the long-term.
According to Usec. Chua, no tax reform means:
1. the poor will likely remain poor—no significant investments in infrastructure, education and health;
2. far less budget for infrastructure projects such as badly needed farm-to-market roads and irrigation;
3. little improvements in public transportation—more time in traffic, less productive people, less time for our loved ones;
4. poor quality education pervades—classrooms will continue to be cramped and teachers overworked, hampering learning potential;
5. quality health care escapes the poor—the poor are likely to get sick and not be attended well, draining their income and chances of succeeding
In defense of the alleged anti-poor provisions, Chua discussed the proposal to increase the VAT threshold to P3 million while retaining the VAT exemption of cooperatives and raw agricultural products.
Further, the following social services will protect the poor and low-income Filipinos:
a. Targeted transfers of P200 per month for a year to the poorest 50 percent of households (10 million households) to mitigate the temporary and moderate increase in prices;
b. Pantawid Pasada: cash cards to PUVs to offset the increase in excise taxes, so fares don’t increase;
c. Pantawid Kuryente: subsidy to lifeline consumers in SPUG areas that use diesel or bunker fuel to power communities;
d. Social welfare card: identification card for the poor to receive social services;
e. Public transport modernization: subsidies to PUVs to convert to more efficient engines and bodies
While tax policy reforms are essentially the game-changer in the proposed tax reform bill, there are tax administration reforms proposed to help both the Bureau of Internal Revenue (BIR) and Bureau of Customs (BOC) improve their efficiency in collecting taxes:
1. Mandatory fuel marking to curb oil smuggling;
2. Connection of cash register/point-of-sale machines to BIR systems for real time reporting of sales and purchases data
3. Use of electronic receipts;
4. Bank secrecy relaxation for criminal cases; and
5. Simplified tax compliance requirements for small businesses.
In connection to the proposed reforms in BIR and BOC, former Finance Secretary Gary Teves raised the need to exempt both BIR and BOC from the Salary Standardization Law (SSL) to attract more competent and honest professionals to serve as Revenue Officers.
He also proposed converting the BIR into a Revenue Authority with fiscal autonomy, just like in Singapore.
Whether you agree with the package or not, it is more important at this point to help further improve the tax reform program than to simply criticize it, as this is a long overdue tax reform.
If the DOF succeeds, this tax reform will uplift the lives of more than 110 million Filipinos.
That should be reason enough to study it thoroughly. —CONTRIBUTED
