Tax bill likely to be passed before year end

The tax reform program of the Duterte administration may be passed into law before this year ends after it got the Senate's approval, tax expert Raymond Abrea said.

"It's more likely that the bill will be signed into law before the end of this year, to take effect in January 2018," the tax reform advocate told The FREEMAN yesterday.

Last September 20, Sen. Angara endorsed the Senate Ways and Means Committee Report for plenary approval on Senate Bill 1592, 2, its version of the Tax Reform for Acceleration and Inclusion (TRAIN).

The Department of Finance earlier lauded the panel for its prompt action and 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.

"It is indeed a welcome development and a relief that despite the many politics and drug-related issues, our legislators remain focus in fulfilling one of the campaign promises of the Duterte administration such as lowering income tax as part of the comprehensive tax reform," said Abrea, president of Abrea Consulting Group.

However, Abrea cited that the reform proposal fails to address the inefficiency of the country's tax system allowing big time smugglers and tax evaders to continue doing business in our country.

"To add insult to injury, these are the contributors and supporters of our politicians," he said.

"A genuine tax reform which we are advocating is where the rich pays more taxes while the poor and underprivileged are protected by the government, where honest tax payment is rewarded while tax evasion and smuggling are not tolerated," the tax expert emphasized.

Based on the initial presentation of the Department of Finance (DOF), he said the government can collect at least P231 Billion or equivalent of 2 percent of GDP if the P1.8 Trillion importation gap or smuggling is resolved by the Bureau of Customs and additional P726 Billion or 6.44 percent of GDP if we simplify, address inefficiencies and remove loopholes in the Bureau of Internal Revenue.

"With the unresolved drug-related smuggling involving Customs officials and hundreds of pending tax evasion cases with the Department of Justice, we may have overlooked the 3 main issues resulting to our very inefficient and burdensome tax system," he said.

Meanwhile, the DOF has maintained that the proposed Tax Reform for Acceleration and Inclusion Act (TRAIN) will benefit 99 percent of Filipino households because of its proposed income tax cuts for salaried workers plus the unconditional cash transfers for the country’s poorest families.

“The Philippines cannot afford to just muddle through if it were to catch up with its more successful neighbors and realize its collective goal of eradicating extreme poverty,” Finance Undersecretary Karl Kendrick Chua earlier said in a statement. “At the core of the tax reform is the vision to eradicate poverty, reduce inequality, and bridge the Philippines towards the future.”

As for claims that the TRAIN will make life easier for the rich at the expense of the poor, Chua said ” the opposite is true “as the bill will benefit salaried workers in the form of lower taxes, which will increase their take home pay, and shift the burden to the rich who will be taxed at a higher rate of 35 percent from the current 32 percent.

On proposals to merely improve tax collection, Chua noted that even if the Bureaus of Internal Revenue (BIR) and of Customs (BOC) were to become 100 percent efficient, they would still be unable to achieve their collection goals because the current tax system itself is riddled with loopholes and inherent deficiencies that bar the BIR and BOC from hitting, much less surpassing, their annual revenue targets.

As for the proposal to include a tax on sugarsweetened beverages under TRAIN, Chua pointed out that this is a health measure, designed to reduce consumption of easily accessible yet unhealthy drinks that increase the risks of obesity and diabetes among Filipinos.

“The monthly maintenance for diabetes, for example, is around P5,000 to P60,000 per year. This is not affordable for 80 percent of the population,” he said.

Moreover, “poor health traps households into poverty, reducing productivity and burdening families with medical expenses and giving up productive time to care for the sick,” Chua said.