Finance Secretary Carlos G. Dominguez III yesterday unveiled the details of the planned and much-awaited tax amnesty program aimed at shoring up revenues to help fund the massive infrastructure projects of the Duterte administration.
“This year, we hope to improve further our revenue collections with a proposed tax amnesty program. The program will help clear the dockets as well as enable the transfer of stranded real properties so that they can be made economically useful,” Dominguez said in a speech before the Rotary Club of Manila.
In particular, the Department of Finance is proposing an estate tax amnesty where the government will collect only 6 percent of the net undeclared estate tax for those who died prior to Jan. 1, 2018, Dominguez said.
He said that estate tax used to be up to 20 percent.
The department is also proposing proposing a general tax amnesty on all unpaid internal revenue taxes excluding internal revenue taxes arising from importation and customs duties, Dominguez added.
The Finance chief said they also wanted to offer amnesty on tax delinquencies, at a rate of 50 percent on basic tax, excluding interest charges and surcharges.
“For those already facing criminal cases in court, we are proposing a rate of 80 percent of the basic tax,” he added.
Dominguez earlier said the government was eyeing to implement the much-awaited tax amnesty by April next year to coincide with the deadline of filing income tax returns.
Tax amnesty forms part of tax reform package “1B,” an offshoot of the Tax Reform for Acceleration and Inclusion (TRAIN) Act signed by President Duterte last December.
Besides a general tax amnesty, package 1B also includes estate tax amnesty, higher motor vehicle user’s charge, bank secrecy relaxation and automatic exchange of information.
Tax package 1B was a result of the Senate’s removal of the tax administration measures from the original first tax reform package passed by the Lower House last year under House Bill No. 5636.
Package 1B will add about P40 billion in revenues.
The DOF was optimistic tax reform package 1B would be passed by Congress in the third quarter.
He said another reform that the DOF was proposing was to treat value-added tax (VAT) “purely as a consumption tax.”
“As such, it will be collected at the point of consumption or sale, and it will be refunded when the consumption is done outside the Philippines. VAT exemptions should not be granted as investment incentives,” he said.
In general, “the tax reform program will assure us of sufficient revenues to fund the infrastructure modernization and expand social services,” Dominguez said.
“Thirty percent of incremental revenues generated from the tax reform law will be used to pay for social services. There will be larger allotments for improving public health, upgrading our educational system and providing conditional cash assistance for the poorest of the poor. This, after all, is what modern governments are about: looking after the welfare of their people and providing them effective protection. Meanwhile, about 70 percent of the revenues raised from the new law will be directed to infrastructure modernization,” the Finance chief said.
Besides the TRAIN law, up to five more tax packages, including pending legislation on corporate income taxation reform coupled with the rationalization of fiscal incentives, will be pursued by the Duterte administration.