DOF to respect Senate version of tax reform

The Department of Finance (DOF) said it will respect the decision of the Senate if the upper chamber decides to partially adopt the Duterte administration’s first tax reform proposal.

Finance Secretary Carlos G. Dominguez III said that while they remain hopeful the Senate will approve in full their R134-billion tax reform measure, the DOF respects the function of the lawmakers.

Senate Ways and Means Committee Chairman Juan Edgardo M. Angara said last week that they will only adopt 50 percent to 70 percent of the DOF’s tax reform bill.

In particular, Angara said they will introduce changes to the proposed tax rates on sugar-sweetened beverages and petroleum products.

“You know we respect the Senate, the legislature, that is you know obviously what they perceive their function to be, we respect that. Of course, we will continue trying to convince them that what is required is a bit more than that,” Dominguez told reporters.

“Again, I said you know this government works as a team and the administration is certainly aware that there are other opinions and we try to engage them in discussions towards that goal,” he added.

Angara said the Senate version will lower the proposed excise levy on sugar-sweetened beverages from R10 to R5 billion, as well as change the annual increase in petroleum taxes.

“They (DOF) proposed the sugar sweetened tax, we plan to lower it from R10 per liter to R5 per liter. Then on fuel, we’re keeping the R6 but the phasing will be different, the distribution won’t be P3, P2, P1,” Angara said.

Under the House-approved Tax Reform for Acceleration and Inclusion measure, fuel taxes will be raised by R3 per liter next year, R2 per liter in 2019 and R1 per liter in 2020.

The proposed higher levy on automobiles and the rationalization of value-added tax (VAT) exemptions would be maintained by the Senate, Angara assured.

Asked if the DOF is amenable to Senate’s proposed compensating measures for changing its tax reform bill, Dominguez said they need time to study first the proposal.

Angara said the Senate plans to compensate the changes by introducing excise tax on cosmetic products and services, use of plastics as well as dividends income.

But Dominguez is lukewarm on Angara’s compensating measures.

“We have actually not really studied anything with regard to the cosmetics so we cannot really comment on it,” Dominguez said.

“With regard to taxes on dividends and capital income that is going to be part of our package in the future. Actually it is a rather a complicated issue because it’s not only on dividends, it’s on basically passive income,” he added.

Based on Angara’s own estimate, the net gain from the Senate’s tax reform version would be around R130 billion during its first year of implementation, slightly lower than DOF’s R134 billion projected revenues.