DoF expects second tax reform package out by third quarter

THE FINANCE department’s proposals for the second package of the tax reform program may be released as early as the third quarter, with an analysis of the impact of certain tax incentives expected to be completed by mid-year.

Finance Undersecretary Karl Kendrick T. Chua told reporters: “Mid-year we will be finished with the TIMTA (Tax Incentives Management and Transparency Act) data analysis, so by second half of the year.” He was asked at a conference in Subic when the Finance department will forward the second tax reform package.

Mr. Chua was referring to the unitary database for monitoring and analysis of tax and duty incentives of registered business entities reflected in their filed tax returns and import entries, as evaluated and determined by the country’s revenue collecting agencies.

“[T]he corporate [income tax] is really the next one because we are just waiting for the TIMTA data. Once we have the data, we will analyze the cost and benefit of these objectives and then decide how we will proceed,” he said.

The second of the four packages of the comprehensive tax reform program features a reduction of corporate income taxes to 25%, from the current top rate of 30%, and will rationalize fiscal incentives of businesses.

The third package, which concerns an estate and donor tax amnesty, was originally scheduled after implementation of package two, but a similar measure was already approved in the lower house of Congress last month. The fourth tax package includes reforming financial or capital income taxation, while the fifth involves health measures involving products such as alcohol, tobacco, and sugary beverages.

Mr. Chua added that reform of the sin taxes system may need to wait two years before a proposal is filed in Congress, as the Finance department still needs to review the effect of the recent shift to a unitary tax on tobacco products from the previous two-tiered structure.

Moreover, the department expects the implementation of the first tax reform package at the start of the second half of the year, for additional revenue to be programmed during the budget season.

“Our target is you know hopefully by middle of the year. Because once we exceed the middle of the year the budget cycle starts and you know, we don’t want any more time not to be spent. So we will work very hard before the cycle starts,” said Mr. Chua.

The P162.5 billion additional revenue generated in the first year of implementation of the tax reform, is planned to be used in infrastructure projects, complementing foreign development assistance.

With a little over three months left until the target date, Mr. Chua remained confident of its approval. “The VAT (value-added tax) reform in 2005 took five months, so it’s doable. That’s the benchmark,” he said.

Albay Rep. Jose Ma. S. Salceda said earlier that the comprehensive tax reform would “ensure financial sustainability” of the government’s infrastructure push, helping make the Philippines an upper-middle income country by 2022.

The final Ways and Means committee hearing at the House of Representatives is scheduled today before Congress goes on a break on Wednesday. The DoF is highly hopeful that a committee report would have been furnished before session adjourns. —