Work starts on 2nd tax reform package

THE DEPARTMENT of Finance (DoF) is readying the second package of tax reforms for submission to Congress in the fourth quarter, after Malacañang moved to expedite approval of the first tranche in Congress in a bid to ensure that its massive infrastructure push in the next five years will be adequately funded.

“Ngayon, may marching orders na si Secretary na kailangan nang i- draft ni Karl, so nagsisimula na ‘ yun (Finance Secretary Carlos G. Dominguez III has given marching orders to Finance Undersecretary Karl Kendrick T. Chua to draft the second tax reform package, so that work has begun),” Finance Assistant Secretary Paola A. Alvarez, the department’s spokesperson, told reporters yesterday.

The second package will consist mainly of a cut in corporate income tax in order to encourage companies to spend more and to improve the country’s attractiveness to foreign investors besides, as well as of a rationalization of fiscal incentives in order to plug revenue leaks by ensuring only those sectors that need perks have them.

The DoF had said earlier that corporate income tax rates may be cut to 25% from 30% currently.

Mr. Dominguez told reporters separately at the DoF head office yesterday that the department hopes to submit its draft of the second tax reform package to Congress “about in the last quarter of the year.”

Mr. Chua told reporters on Tuesday last week that the second package will be revenue-neutral, saying: “Hindi siya ( It is not a) revenue measure. It’s for fairness.”

PUSHING THE FIRST PACKAGE

At the same time, Malacañang has moved to help expedite legislative approval of the first tax reform package, as contained in House Bill No. 5636, by certifying the need for its “immediate enactment.”

That means both the House and the Senate can now approve the measure on second and third reading consecutively without having to wait for at least three days in between as otherwise required by rules.

“We believe that the President’s certification of the tax reform bill as an urgent legislative measure can help ensure timely and full passage of the tax reform package before the close of the session on June 2, 2017, so that the benefits of the reform can be felt sooner,” a DoF statement yesterday quoted Mr. Dominguez as saying in a memorandum to President Rodrigo R. Duterte.

The first package, which DoF submitted to both chambers of Congress in September last year and which House Ways and Means committee Chairman Rep. Dakila Carlo E. Cua filed last January, seeks to reduce personal income tax rates and to offset the consequent foregone revenues by expanding the value- added tax base, introducing a P10-per-liter tax on sugar- sweetened beverages, and raising the excise taxes on fuel and on automobiles.

Senate President Aquilino dL. Pimentel III filed the Senate version of the measure, Senate

Bill No. 1408, last March, and the chamber’s Ways and Means committee chaired by Sen. Juan Edgardo M. Angara has so far conducted six public hearings on it, the DoF noted in its press release.

The law requires that tax measures emanate from the House, meaning the Senate has to await final plenary approval in that counterpart chamber before itself acting on the bill in plenary.

“The benefits to be derived from this tax reform measure will sustainably finance the government’s envisioned massive investments in infrastructure thereby encouraging economic activity and job creation, as well as fund the desired increase in the public budget for health, education and social programs to alleviate poverty,” Mr. Duterte said in separate May 29 letters to Messrs. Pimentel and Alvarez.

The Philippine Development Plan 2017-2022 approved in February aims to spur gross domestic product growth to an annual average of 7-8% in that period from the 6.2% average in the six years under the preceding government of former president Benigno S. C. Aquino III. The administration of Mr. Duterte, who assumed office at noon of June 30 least year, believes such pace of economic expansion is needed to slash unemployment rate to 3-5% by 2022 — when the current government steps down — from 5.5% last year and achieve its bottom line of cutting the national poverty rate to 14% also by then from 21.6% in 2015.

The government plans to embark on an infrastructure buildup — spending an estimated P8.4 trillion in the next five years — in order to provide a better environment for economic activity to thrive.

Failure to approve the first package, Mr. Dominguez warned, could “disrupt” the planned increase in public investments in infrastructure, education, health and social protection which the government plans in order to make sure that fast economic growth lift even more Filipinos out of poverty.

“To achieve these objectives, the administration plans to increase the budget for infrastructure from P795 billion in 2016 to P1.832 billion in 2022 to support the ‘ Golden Age of Infrastructure’, the budget for education from P551 billion to P1.269 billion, the budget for health from P133 billion to P272 billion, and the budget for social protection, welfare and employment from P240 billion to P509 billion,” DoF’s statement quoted Mr. Dominguez as saying. “When they ( both chambers of Congress) get the certification, dere- derecho na tayo ( we can have consecutive legislative approval) because the target is to pass it (in the House) by Wednesday. Lagpas na sa plenary, tapos Senate na tayo (then the measure goes to the Senate),” Ms. Alvarez said.

But Mr. Cua said last night that four more lawmakers were set to ask questions about HB 5636 during Monday’s plenary session.

“Madami pa, mga apat pa (there are many more who want to ask questions about the reform, about four more),” Mr. Cua said at the sidelines of the plenary session last night.

“It’s continuing deliberation and debates. There is also a period of amendments where all the amendments will be voted upon [ by House members],” he added.

Mr. Cua was uncertain when the measure could be approved at least on second reading, but both chambers of Congress have until Wednesday to wind up business in this first regular session of the 17th Congress.

Congress reconvenes on July 24 for its Second Regular Session, with Mr. Duterte delivering his second State of the Nation Address.