TRAIN 2 deemed crucial to full tax reform agenda

The Package 2 of the Tax Reform for Acceleration and Inclusion (TRAIN) is an essential component of the overall tax reform agenda.

Tax expert Raymond Abrea said that while Package 1 has faced various issues, there is also a need to be vigilant on the passage this year of the Package 1B which is the General and Estate Tax Amnesties and Package 2 which seeks to lower corporate income tax and rationalize fiscal incentives.

“These are equally important in our tax reform agenda as we need all aspects to be considered if we want to achieve a genuine tax reform,” said Abrea, founder of Asian Consulting Group.

He believes pushing for these packages will encourage voluntary compliance as well as attract more foreign investments.

“If we want to push for a genuine tax reform, we have to address inefficiencies in our tax system worsen by a very narrow taxpayer base and low voluntary compliance,” the tax reform advocate pointed out.

“Tax administration is key to implement tax policy reforms, while tax education and compliance of taxpayers are indispensable if we want to collect the right taxes,” he also added.

Corporate tax reform comprises Package 2 of the Duterte administration's Comprehensive Tax Reform Program (CTRP).

The Department of Finance is targeting to introduce this year the rest of the CTRP packages that mainly cover property and capital income taxation.

HB 7458, authored by Deputy Speaker Raneo Abu, Deputy Majority Leader Aurelio Gonzales and Rep. Dakila Carlo Cua, who chairs the House ways and means committee, was filed last March 20.

The bill provides for a one-percentage point reduction in the current 30 percent CIT every year for domestic corporations, resident foreign corporations and non-resident foreign corporations starting 2019, provided that the cut would not reach lower than 20 percent, while modernizing fiscal incentives to make them performance-based, targeted, time bound, and transparent.

Similar to the version proposed by DOF and Department of Trade and Industry, the bill also aims to formulate a three-year Strategic Investments Priority Plan (SIPP) to ensure that only industries that provide positive spillover to the economy, based on rigorous cost-benefit analysis, are given incentives.