Senate tax reform bill to generate under half of House bill’s revenue

THE SENATE version of the tax reform program will generate less than half of that generated by the House version of the bill, according to latest estimates from the Department of Finance (DoF).

In a text message, Finance Undersecretary Karl Kendrick T. Chua said that the Tax Reform for Acceleration and Inclusion (TRAIN) program, as embodied in the provisions of Senate Bill No. 1592 — will generate P59.9 billion in additional revenue for the government.

The Finance department version of the legislation will raise P157.2 billion, while the House of Representatives passed a bill that will raise P133.8 billion — which is already programmed in the 2018 budget.

Sought for comment, Finance Secretary Carlos G. Dominguez III replied with a link to an Oct. 2 BusinessWorld column, which carried the title “Bye bye, Build, Build, Build,” an apparent reference to the government’s infrastructure program, which relies heavily on funding from tax reform.

Mr. Dominguez has said that the House version “is close to what the administration wants.”

However, the DoF also showed “revised estimates” for its version of the bill, as well as that of the House, in a computation schedule sent to reporters.

The revised estimate from the DoF proposal nets P149.6 billion, while the revised House Bill No. 5636 estimate yields P119.4 billion.

According to the computation’s footnotes, the revised estimates mean “estimates as of September 2017 due to new data or better methodology, and change in position.”

It said that the DoF and House versions generated reduced amounts “due to the ‘outside customs territory’ legal fiction which lowers the value-added tax ( VAT) yield,” and noting that “the auto excise is adjusted downwards due to much bigger frontloading in 2017.”

Still, Mr. Chua said that the computations are a work in progress. “We are waiting for Senate feedback.”

Sought for comment, ways and means committee chairman Sen. Juan Edgardo M. Angara said that the Senate is “surprised by the DoF’s new revenue estimates.”

“It seems that DoF’s figures are changing. The DoF supplied all the figures that the Senate ways and means committee used for its version. And, as far as the committee’s computation right before filing its report, the revenue impact is almost the same as the House version,” Mr. Angara said in an emailed statement sent by his staff.

“The committee sought to come up with a version that would provide tax relief to 99% of individual taxpayers and, at the same time, meet the revenue target so as not to impair the government’s capability to finance its programs and projects,” he added.

Still Mr. Angara said that the Senate will work closely with the DoF after the latest estimates, noting that “there is still room for compromise on the lifting of other VAT exemptions.”

“There are previously discussed exemptions which have little revenue impact before, but are now presented as sizable revenue items. This will change the committee’s consideration of certain items going forward,” he added.

The computations for VAT had the biggest variance between the House and Senate bills at P60.9 billion and P14 billion, respectively.

Key differences in the Senate bill were the lower personal income tax-exempt salary threshold at P150,000, from the House’s P250,000; the annual incremental increase of fuel excise taxes at P1.75, P2 and P2.25 per liter over the next three years against the House’s P3, P2 and P1 scheme; and exemptions from VAT of socialized housing except those outside Metro Manila and valued over P2 million.

It also includes a sugar sweetened beverage excise tax of P10 per liter for high fructose corn syrup, P3 per liter for non-caloric sweeteners and P5 per liter for caloric sweeteners compared to the blanket P10 per liter in sugar sweetened beverages under the House bill.

It also seeks to put a 20% ad valorem tax on cosmetic surgery, a higher 20% tax on foreign currency deposits, dividends and capital gains tax, from the current 10%.

The bicameral conference committee will attempt to reconcile the House and Senate versions, before sending to Malacañang for signature. —