Pimentel says senators also buck
capping of VAT exemptions
By: Ben O. de Vera - 12:20 AM
January 16, 2017
Tax reform, especially lowering
personal income tax rates, will be high in the Senate’s priority when sessions
resume today, but Senate President Aquilino Pimentel III said they would
continue to oppose moves to slap new taxes.
“Tax reform is very high in our
priorities, but I think the Department of Finance should explain it more deeply
before the senators because we have some disagreements,” Pimentel told the
Inquirer last week.
Specifically, Pimentel said many of
his colleagues in the Senate were opposing the DOF’s proposals to raise excise
taxes on oil products as well as withdraw the value-added tax (VAT) exemption
being enjoyed by senior citizens and persons with disabilities. “For us, those
proposals are question marks,” he said.
“My personal position is this—the DOF should
prioritize the campaign promise of the President to reform the income tax
brackets and lower the tax burden. But what I’m hearing is the imposition of
new taxes, which I’m not excited about. In the campaign, there was no mention
of additional taxes,” Pimentel said.
Senate ways and means committee
chair Sen. Juan Edgardo Angara said in a recent text message that the committee
“will have public hearings when Congress resumes and get feedback from
stakeholders” with regards the DOF’s tax policy reform program, specifically
the first package pitched to legislators in September last year.
Before Congress went on Christmas
break, the DOF submitted a revised version of the first package of its
comprehensive tax reform proposal that also included the mandatory marking of
oil products as well as the grant of absolute amnesty on estate tax deficiency.
A copy of the revised draft bill
obtained by the Inquirer said the first package “seeks to lower personal income
taxes, broaden the VAT base, adjust excise taxes on petroleum and automobiles,
reduce the estate and donors tax, and provide an amnesty to past estate tax
cases.”
Under the first package, the
following tax administration measures were to be pursued: Mandatory use of fuel
marking; recognition of e-receipts; mandatory interconnection of large and
medium firms point of sale machines and accounting system with the Bureau of
Internal Revenue; mandatory use of GPS locks when transporting cargo from ports
to economic zones and free ports; shift to quarterly VAT and percentage tax
filing to improve compliance, and relaxation of bank secrecy for fraud cases.
While it was initially supposed to
be included in the succeeding tax reform packages, the DOF is now moving to include
in the first package the reduction of estate and donors tax to 6 percent while
also providing absolute amnesty on past estate taxes that had been unpaid.
The bill retained the salient
provisions of the original first package as proposed by the DOF, including
adjusting tax brackets to correct “income bracket creeping”; reducing the
maximum personal income tax rate to 25 percent over time, save for the
“ultra-rich” who would be slapped a higher 35 percent, and shifting to a
simpler modified gross system.
As lower personal income taxes would
result in foregone revenues estimated at P127.4 billion by 2018, the DOF plans
to offset and gain P301.6 billion by expanding the VAT base by limiting
exemptions to necessities such as raw food, education and health products and
services; increasing the excise tax slapped on all oil products and indexing
these to inflation as well as jacking up excise taxes on automobiles.
The government stands to generate a
net revenue gain of P174.2 billion from the first package by 2018, the first
year of implementation being considered by the DOF as the bill was targeted to
be enacted into law in 2017.
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