DOF rejects Senate ‘select’ VAT-exemption
The Department of Finance (DOF) is against a Senate proposal to keep more than half of the current value-added tax (VAT) exemptions being enjoyed by private and public institutions.
Finance Undersecretary Karl Kendrick T. Chua said that under Senate Bill No. 1592, only 37 out of 80 VAT exemptions will be removed, dragging down the tax reform’s potential revenue to below R134 billion. Based on Chua’s estimate, if the lawmakers would adopt the DOF’s proposal of removing 80 VAT exemptions under the present tax system, this would result in R60 billion additional revenues.
“Under the Senate version, some not all exemptions were removed, so we have to compute one by one [to get its net revenue gain and] it will take time. More than 30 something were retained by the Senators,” Chua said in an interview.
Chua also said that their initial computation showed the Senate bill, without the revenue from VAT exemptions, would generate only R55 billion.
The net gain could be higher once the DOF factors in VAT, which at this time cannot be done yet due to changes introduced by the Senate, the finance official said. “Under the House bill, the clause on VAT exemptions states all other laws not consisting with this law are hereby repealed, but under the Senate, it’s selective. Our original bill is repeal all,” Chua said.
Asked about the revenue impact of the Senate’s proposal, Chua said “we have to check one by one because some provisions have more revenues than the other, it’s complicated.”
Under SB-1592, about 12 government owned and controlled corporations (GOCCs) are no longer VAT-exempt, along with 13 state-run schools, colleges and universities, as well as 10 special laws pertaining to the coconut, dairy industries, among others.
Likewise, the Senate is proposing the removal of VAT exemptions for the Veterans Federation of the Philippines, and regional headquarters based in the country.
Last week, Finance Secretary Carlos G. Dominguez III said they want the Duterte administration’s first tax reform measure to be signed into law by middle of December to allow its full implementation beginning January next year.
“We hope the Senate will pass the TRAIN [Tax Reform for Acceleration and Inclusion] on third reading before going into recess in mid-October, the bicameral conference to conclude in November, and the President to sign the bill into law by December 15, 2017,” Dominguez said.
“This schedule will allow us to implement the tax reform on January 1, 2018, so that the benefits of the reform can be felt at the soonest possible time,” he added.
Meanwhile, Dominguez welcomed the endorsement by the Senate ways and means committee for plenary approval of Senate Bill No. 1592, its version of TRAIN.
According to Dominguez, he was hoping that the Congress could soon pass its final version in time for this initial tax reform package’s planned implementation by January next year.
The finance chief also thanked the committee chaired by Senator Juan Edgardo Angara for its “patience and commitment” to CTRP, adding he is “looking forward” to working with the Senate in coming up with a measure that would “deliver the most benefits to the Filipino people at the soonest possible time.”