President may veto watered-down tax reform bill
The Department of Finance may seek the President’s veto if the Senate will not pass the first package of the proposed comprehensive tax reform program in full.
Finance Secretary Carlos Dominguez III told reporters last week that a presidential veto would be an option to be pursued by the DOF if the Senate eventually approved a watered-down version of the Tax Reform for Acceleration and Inclusion (Train) bill aimed at slashing personal income tax rates while slapping new or additional taxes on consumption.
Dominguez said they were pushing to get the P137 billion in net revenues to be generated from the DOF-backed Senate Bill No. 1408 filed by Senate President Aquilino “Koko” Pimentel Jr.
Given the ambitious infrastructure development program as well as additional expenditures arising from the recent presidential order to grant free tuition in state universities and colleges, Dominguez said they wanted to shore up revenues to keep the programmed annual budget deficit at 3 percent of gross domestic product (GDP) in the next six years in check.
“It’s not really the net revenue that we are looking at—it is the deficit. Anything above 3 percent of GDP is not responsible,” Dominguez said.
Dominguez also acknowledged that lower gains from tax reform would make it very difficult to fund additional disbursements.
In the case of the free tuition scheme, Dominguez said: “I just talked to [Budget Secretary] Ben [Diokno], that is P50 billion for the first year, probably around P60 for the second year, third year is about P70, and fourth year is about P75-80 billion. Where are we going to get the money?”
Without a comprehensive tax reform in place, the country will remain “business as usual,” Dominguez added.
“We won’t have a breakthrough, your children will be poor—that is what it means,” the finance chief said.
While tax reform will not be able to generate all the funds needed to build more infrastructure supportive of economic growth and finance social protection program, Dominguez said that it was a good start to raise revenues.
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