DOF to submit 2nd tax reform package next year

The Department of Finance (DOF) is targeting to submit to Congress the second package of its Comprehensive Tax Reform Program (CTRP) by January 2018.

In an interview last Friday, Finance Secretary Carlos Dominguez said the DOF has moved the target submission of the second CTRP package from the fourth quarter of 2017 to early next year as it concentrates first on its fight for the first tax reform bill in the Senate and the bicameral committee.

“I think we should finish package one first before we discuss the package two. Probably we will move it three months down, so by January. I think it is better for us to concentrate on the current issues before we discuss another one,” Dominguez said.

Earlier, the DOF said its goal was to submit the draft of the second CTRP package by the last quarter of the year.

According to earlier reports of the DOF, key features of the second tax reform bill will include the reduction of corporate income tax rate to 28 percent by 2019 and 25 percent by 2021 from the current 30 percent, and the rationalization of fiscal incentives being enjoyed by certain business sectors.

Only industries that meet the criteria based on performance, transparency and target would have their incentives retained.

The package, however, proposes for a sunset provision for existing incentives, which is a maximum of five years. Under the proposal, the coverage of the Fiscal Incentives Review Board should include all incentive recipients, from state corporations to enterprises within ecozones.

The DOF said package two would be designed as a revenueneutral measure, as the loss expected from the lower corporate income tax will be offset by the removal of tax incentives.

Meanwhile, the first package of the CTRP, as contained by the Tax Reform for Acceleration and Inclusion Act (TRAIN), is expected to be up for plenary deliberations by Sept. 20, Senate ways and means committee chairman Juan Edgardo Angara said.

However, Angara said the bill would only likely adopt about 70 percent of the original proposal of the DOF with some provisions watered down and some new measures – such as taxes on dividend income, cosmetic products and plastic tax – introduced.

Dominguez said the DOF would respect the final proposal to be made by the Senate ways and means committee, but would still work on convincing Congress to pass the original form of the bill.

“We respect the Senate, the legislature. That is, you know obviously, what they perceive their function to be; we respect that. Of course, we will continue trying to convince them that what is required is a bit more than that,” Dominguez said.

However, Dominguez said the new proposals, particularly the tax on cosmetic products and procedures, needs to be studied.

“We have actually not really studied anything with regards to the cosmetics so we cannot really comment on it. But with regards to taxes on dividends or capital income, that is going to be part of our package in the future,” he said.