Tax reform seen to result in P173.8-B revenue loss

THE proposed comprehensive tax reform which will lower income tax rates for personal and corporate income will result to revenue loss of P173.8 billion annually for the government.

Finance Secretary Carlos Dominguez on Monday said during the Development Budget Coordinating Committee meeting at the House of Representatives that “lowering income tax rate could result in a P139 billion revenue loss, and lowering corporate income tax rate could result in P34.8 billion revenue loss.”

Dominguez earlier proposed that the Duterte administration has to lower personal income tax to 25 percent from 32 percent and lower corporate income tax from 30 percent to 25 percent. This reform will be implemented by the finance department in a period of two to three years.

“The 10-Point Socioeconomic Agenda revolves around the need to maintain sound macroeconomic and fiscal policies, invest in the people, and address the binding constraints to investment and job creation. This is why we need tax reform,” Domiguez said.

The comprehensive tax reform package also includes the lowering of capital gains tax rates patterned after the taxation systems of Singapore and HongKong “to compensate for the deficit resulting from reduced tax rates, the foremost suggestion is to increase excise taxes by expanding the definition of luxury goods.”

In a bid to offset the projected revenue loss, Dominguez said the government is planning to eliminate some VAT exemptions and zero-rated transactions as well as removing a few fiscal incentives while trying to broaden the tax base, and imposing additional excise taxes such a “sweet tax” on sugary drinks and fatty food.

Dominguez also said they are looking at adjusting fuel excise tax pegged at P4.35 per liter since 1997. It is proposed to increase to P5.65 per liter or a total of P10.

Meanwhile, Mindanao Business Council chair, Vicente T. Lao, in a previouse interview said that reduction of taxes will be good for the economy as people will have more disposable income paving way for a more moving economy.

But he was quick to add the negative impact of it will be on the government’s income.

“But there will be residual effects, the government will surely source their income to other sources,” Lao said.