Bayanihan loan relief to cost gov’t P470M in foregone taxes — think tank
MANILA, Philippines — The loan relief extended under the Bayanihan to Heal as One Act which exempted payment of documentary stamp tax (DST) is expected to further weaken tax collection just when the government needed more money for COVID-19 response, the state-run think tank National Tax Research Center (NTRC) said.
Citing Department of Finance (DOF) estimates, NTRC said in a report titled “Tax Implications of Republic Act (RA) No. 11469 (Bayanihan law) on DST” that such exemption will cost the government P470 million in foregone tax revenues this year.
“The exemption of qualified loans during the enhanced community quarantine (ECQ) period from the DST is justifiable to ensure full compliance of the provision set under Section 4(aa) of RA 11469 from lending institutions as well as to reduce their financial burden and their clients as well,” NTRC said.
“However, this will result (in) substantial revenue loss from the DST exemption… There is, thus, a need for the Bureau of Internal Revenue (BIR) to ensure the effective and efficient collection of DST on other documents/instruments/transactions not covered by the exemption under Revenue Regulations (RR) No. 8-2020,” NTRC added, referring to the BIR guidelines issued by Finance Secretary Carlos G. Dominguez III and Internal Revenue Commissioner Caesar R. Dulay last April.
The loan moratorium mandated in the Bayanihan Law waived the DST, which was usually being slapped on loan agreements.
Specifically exempted from DST payments were credit extensions and restructuring, as well as micro-lending such as those provided by pawnshops.
A total of P188 billion in DST had been projected to be collected in 2020, up from actual collections of P139.2 billion in 2018 and P170.4 billion in 2019.
However, NTRC said “the slowdown in economic activities and fewer transactions brought by COVID-19 as well as the DST exemption (under the Bayanihan Law) is expected to cut government revenues from the DST.”
In 2018, the Tax Reform for Acceleration and Inclusion (TRAIN) Act doubled most DST rates, except for those slapped on debt instruments which rose by only half.
The TRAIN Law nonetheless kept the prevailing DST rates on policies of insurance upon property, fidelity bonds and other insurance policies, indemnity bonds, as well as deeds of sale, conveyances and donation of real property.
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