House panel approves substitute bill on 4th TRAIN package
The House Committee on Ways and Means approved yesterday a substitute bill seeking "equitable, simpler and more efficient" taxation of passive income and financial transactions or the fourth package of the Duterte government’s Tax Reform for Acceleration and Inclusion
(TRAIN).
In less than 10 minutes, the House panel, chaired by Nueva Ecija Rep. Estrellita Suansing passed the proposed Passive Income and Financial Intermediary Taxation Act, citing the significant role of the financial sector in the long term growth of the national economy.
According to Suansing, one of the principal authors of the bill, they decided to scrap the requirement that the collective investment scheme (CIS) shall have at least 1,000 owners, investors or participants under the substitute bill.
The substitute bill is a consolidation of two measures – House Bills 8252 and 8323, filed by Suansing and her husband, Sultan Kudarat Rep. Horacio Suansing Jr., and Camarines Sur Rep. Luis Raymund Villafuerte, respectively.
“One of the amendments is the scrapping of the requirement for the collective investment scheme — that there should be 1,000 owners, and participants),” Suansing said in Pilipino in an interview after passing the substitute bill.
She said instead of removing the documentary stamp tax (DST) on all certificates, the panel gave in to the Department of Finance’s proposal to impose a uniformed documentary stamp tax of 140 from 150.
“In the TWG, we removed the documentary stamp tax sa lahat ng certificates, so hindi kaya, kasi ma-de-deplete yung revenue, lalaki yung loss sa revenue, that’s why binalik namin 130 ngayon tapos sa proposal nila 150, so pumayag sila na 140,” Suansing said.
She said under the bill, the cooperatives continue to enjoy tax exemption on interest income, capital gains and documentary stamp.
“We want to sana impose na magkaroon na [tax on interest income, capital gains and documentary stamp], tanggalan ng exemption, so binawi natin, so tuloy na na exempted sila sa tax,” she said.
During the panel meeting yesterday, Suansing directed the Secretariat to draft the committee report on the measure.
The House leader said they are eyeing the plenary discussion of the bill next week and they aim to have it approved before Congress adjourns for month-long Christmas break.
Suansing stressed that the optimal taxation of capital markets, and the products and transactions that come with them, is an essential element in developing the capital market.
“A simpler, fairer, more efficient, and regionally more competitive tax system for capital income and financial intermediation is needed to encourage savings and develop and deepen the capital markets,” the authors said.
80 tax rates and bases Currently, there are some 80 tax rates and tax bases pertinent to the financial sector – capital income tax, 52 rates and bases; tax on financial intermediaries, 8; and financial transactions’ DST, 20.
Earlier, Speaker Gloria Macapagal Arroyo assured they will “do their best” to pass the TRAIN Package 4.
Villafuerte, one of the authors of the bill, said taxation must not only be fiscally adequate and administratively liable, it must also be “fair and unhindered.”
“The combinations of applicable tax rates on tax bases upon meeting certain qualifiers results in a complicated tax map with plenty of room for tax arbitrage or sly mechanisms to reduce a taxpayer’s liability. This complexity entails high administrative and compliance cost, and discourages more transparent returns since taxpayers end up paying different taxes derived from the same base,” he said.
He said the bill encourages capital market development by adjusting, if not removing altogether, taxes that deter legitimate movement towards initial public listing of companies.
Suansing said the objectives of the measure is "to provide neutrality in tax treatment across financial instruments, simplification of the tax system, improvement of equity among investors and savers, and reduction of arbitrage opportunities and promotion of capital market development, and tax competitiveness within the context of financial globalization, increased capital mobility and financial inclusion.”
DOF Undersecretary Karl Kendrick Chua said the fourth package of the TRAIN “is designed to be broadly revenue neutral.”
He said the measure seeks to increase individual earnings from interest income and make them more inclusive.
He maintained that the government aims to address the deficiencies of the financial sector and institute necessary reforms to at least achieve revenue neutrality so that important government projects will be continuously funded.