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Save for ‘digital’ tax, Marcos Jr. chief economic manager cold to other new taxes

By: - Reporter / @bendeveraINQ
/ 03:13 PM July 09, 2022

Higher subscription fees are coming soon for Netflix and Spotify accounts as well as other online transactions once they’re slapped with value-added tax (VAT), but President Ferdinand Marcos Jr.’s chief economic manager remains cold to many other new or higher taxes pitched by the previous administration.

“Sooner than later,” upon the bill’s passage, was Finance Secretary Benjamin Diokno’s response when asked Friday when the government plans to implement the tax on online purchases amid a boom in digital transactions. Such a measure passed the Lower House during the 18th Congress, and it can be reintroduced then tackled by the Senate in the upcoming 19th Congress.

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“If you buy a product from a regular store, you pay tax; I think we should also pay tax on online sales,” Diokno said, making such a levy “fair.”

Earlier Department of Finance (DOF) estimates showed that imposing the 12-percent VAT on providers of online advertisement services and digital services, as well as supply of other electronic and online services, would generate P13.2 billion in incremental revenues per year.

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Meanwhile, the plan to impose a levy on single-use plastics would not only increase public revenues but also help in the fight against climate change, Diokno said. A P20-excise tax per kilo of single-use plastic bags would raise additional revenues worth P1 billion yearly, DOF estimates had shown.

Diokno said the Marcos Jr. administration would first ride on the tax reforms on personal and corporate income taxation put in place by the preceding Duterte administration, referring to the TRAIN and CREATE Laws, which he said “significantly improved” the country’s tax system.

The Finance chief said this administration would pursue the two remaining packages — property valuation and capital market taxation — of Duterte’s comprehensive tax reform program. While these measures are both revenue-neutral or would neither add to nor reduce tax collections, they would simplify the tax systems for real properties as well as passive income and financial taxes, respectively.

However, President Marcos Jr. himself and Diokno had been cold to the previous administration’s proposed fiscal consolidation and resource mobilization plan to slap new or higher taxes slapped on consumption plus a three-year deferral of scheduled personal income tax cuts, while slashing public spending on non-priority budget items. The plan left behind by President Duterte’s economic team was aimed at repaying the pandemic-induced ballooning debts and reverting the yawning budget deficit back to pre-pandemic levels.

Instead, Diokno said they will focus on improving tax administration, having inherited a “much-better” tax system. The government also wanted more inclusive economic growth in the next six years so it could collect more taxes from a booming economy, the Finance chief said. The Marcos Jr. administration targets gross domestic product (GDP) growth of 6.5-7.5 percent this year, and 6.5-8 percent yearly from 2023 to 2028.

Diokno noted that the ongoing digitalization at the biggest tax-collection agencies — the bureaus of Customs (BOC) and of Internal Revenue (BIR) — will hike their tax take. “The less contact there is, the less opportunity for corruption,” he said.

The Finance chief said they plan to raise the tax effort or share of collections to the economy by 0.3-0.4 percent yearly, through a combination of good tax administration and economic growth.

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“That’s why we’re focusing on making sure that growth will be faster and more broad-based, [as] that’s where the bigger part of the tax revenues will come from,” Diokno said.

He said the Marcos Jr. administration’s plan to increase the tax effort and grow the economy at a “more ambitious” pace would be enough in the meantime, so there won’t be an urgency to hike or introduce many other new taxes during the near term.

READ: Business groups nod as Marcos forms economic team

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TAGS: Diokno, Marcos, taxes
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