Mixed views on new tax law
The passage of the Tax Reform for Acceleration and Inclusion (TRAIN) bill has drawn mixed views from the Cebu business community.
Mandaue Chamber of Commerce and Industry President Glenn Soco believes the law's general objective is to cut personal taxes and generate more revenues for the government.
"Although, some provisions of the tax reform bill are not clear to us yet, its our impression that the general objective of the said bill is to reduce the taxes of the lower and middle income classes and at the same time widen the tax base to generate more revenues for the government," Soco told The FREEMAN yesterday.
President Rodrigo Duterte signed the bill into law last Tuesday, the first package of the government's proposed Comprehensive Tax Reform Program (CTRP) seen to generate additional revenue to fund the country's investment requirements.
"It is with this agenda that we support in general the tax reform bill of the President as we believe that the necessary tax reforms be made in order to be competitive in the global perspective," Soco said.
He believes there will be adjustments that will be made by both the consumers and the business sector in the short and medium term.
“Every decrease is welcome, any increase is painful," the businessman said.
"That is the sentiment of every taxpayer," he added.
While it cuts personal income taxes, Cebu Bankers Club President Mario Fritz Palileo warned it might also push inflation up once implemented.
"(This) might raise inflation rate due to the increase of petroleum products," the bank executive said.
The government seeks to raise taxes imposed on cars, fuel products, and sweetened beverages, among others, to raise more revenues and offset the reduction in income tax rates.
"Although spending power of those with annual income of P250,000 and below will be increased, interest rates might go up," Palileo told The FREEMAN.
He added that high lending rates are also costly for business.
Tax expert Raymond Abrea, president of Abrea Consulting Group, describes the TRAIN law as a Christmas gift to ordinary employees.
"The key component and primary purpose of the comprehensive tax reform is to update and correct the injustice brought by high tax rate burdened by our employees and the inefficiency in our tax system resulting to a very low compliance among self-employed and professionals," Abrea said in an interview Wednesday.
"Keeping this in mind, and the promise of President Duterte to exempt employees earning P21,000 and below, I think the TRAIN law is really a Christmas gift to all our ordinary employees," the tax advocate added.
"Also, the optional flat 8 percent income tax based on gross sales, in lieu of business and income tax is another welcome development as this will not only lower the tax burden but also the compliance costs among our small businesses with gross receipts/sales of P3 million and below," Abrea explained.
Fred Escalona, executive director of the Philippine Exporters Confederation Inc. – Cebu, expressed concern over the refund scheme under the new law.
Philexport said exporters must be given their actual refund or informed of the denial of their application for refund within 90 days of the filing of the VAT refund application.
The group, in earlier position papers submitted to legislators, reported the hardships exporters encounter in getting VAT refunds for their export sales, with some unable to get back the accumulated VAT they had paid for years.
"The exporters are worried about the refund of VAT on inputs that are currently in effect. So instead of zero VAT rated purchases, the exporters will now pay upfront the VAT as these are covered by exemption if part of their export products," Escalona said.
"Now, they will have to file for a refund under the new law. How long it will take to get their vat refund is what worries them," the export official said.
Earlier, Cebu Chamber of Commerce and Industry (CCCI) President Melanie Ng said the tax reform will allow the Philippines to compete globally.
"Undeniably, our country has one of the highest income tax rates in the ASEAN region and in order for us to be able to compete in the global arena, we hope the tax reform program will soon be adapted to help address the high cost of doing business and contribute to our global competitiveness," Ng said.
Meanwhile, the National Economic and Development Authority (NEDA) welcomed the tax reform law.
“The implementation of TRAIN is essential as it will increase the spending capacity of the average working Filipino, boost revenue-to-GDP ratio, and fund government's infrastructure and human capital investment program,” said Socioeconomic Planning Secretary Ernesto Pernia.
The TRAIN bill exempts those with an annual income of P250,000 and below from personal income tax, and also adjusts excise taxes on fuel and automobiles.
“As we look forward to TRAIN's implementation next year, we will continue to rally for the full implementation of the CTRP to promote equity, and raise the needed revenues for government's programs and projects especially in infrastructure, education and health,” Pernia said.
NEDA's analysis shows that, with the CTRP, real gross domestic product (GDP) level will be higher by 0.5 to 1.1 percent by year 2022.
Meanwhile, NEDA also welcomes the passage of the General Appropriations Act (GAA) for 2018, which was also signed by the President Tuesday. The 2018 GAA proposes a national budget of PhP3.7-trillion, 12 percent higher than last year's budget.
“With the passing of TRAIN and the 2018 GAA, we are well on track in reaching our mediumterm targets. These are in line with the development strategies in the Philippine Development Plan (PDP) 2017-2022, which identifies tax reform, infrastructure development, and human capital investment as priorities,” Pernia said.