Comprehensive tax reform program targets greater economy
CLARK FREEPORT — Department of Finance sees the Comprehensive Tax Reform Program as an element for the Philippines’development into a higher middle income economy.
It revamps the country’s tax system in an effort to make it fairer, simpler and more efficient to all while also raising the resources needed to invest in infrastructure and the people.
Speaking before Central Luzon stakeholders during the recent Philippine Economic Briefing, Finance Assistant Secretary Ma. Teresa Habitan said this was the first time that the Philippines has done the program and executed it without any crisis in the economy.
“The Tax Reform Program is looking forward to provide more inputs, more resources for this present generation of Filipinos so that they can achieve their full potential as individuals,” Habitan emphasized.
Congress passed last year RA10963 or Package 1 which simplifies the income tax brackets by decreasing it to six brackets. Effective tax rates will be low- ered for 99 percent of taxpayers, except the richest.
Package 1, also known as the Tax Reform for Acceleration and Inclusion (TRAIN) Law, likewise lowered estate tax from the highest 20 percent rate to a single rate of 6 percent for net estate with standard deduction of Php5 million to simplify the system as well as exemption for the first Php10 million for the family home.
“It also lowered donor’s tax from the highest 15 percent to a single rate of six percent of net donations above P250,000 yearly,” Habitan furthered.
One of the major provisions of the tax reform is the staggered increase in oil excise.
“The current rates have been unadjusted since 1997, draining some Php145 billion of government revenues annually. Under TRAIN, rates will be adjusted gradually between 2018 and 2020,” she expl ai ned.
As a mitigating measure on oil excise, the poorest 10 million households will receive cash transfers of P200 per month in 2018 and P300 per month in 2019 and 2020.
Coal excise tax, on the other hand, will have a rate increase from P10 per metric ton to P50 per metric ton in 2018, P100 per metric ton in 2019, and P150 per metric ton in 2020 covering both domestic and imported coal. Domestic coal remains VAT exempt.
“TRAIN simplifies the excise tax on automobiles. While the approved rates are considerably lower than originally proposed, it remains that more expensive cars are taxed higher compared to cheaper cars,” Habitan furthered.
Excise Tax on Sugar-Sweetened Beverages (SSB) is a health measure meant to discourage the consumption of sugar-sweetened beverages due to their high-sugar content while encouraging industry players to develop healthier product alternatives.
Covered by SSB are sweetened juice drinks, sweetened tea, all carbonated beverages with added sugar including those with caloric and non-caloric sweeteners, flavored water, energy drinks, sports drinks, other powdered drinks not classified as milk, cereal and other grain beverages, and other non-alcoholic beverages that contain added sugar. Key exemptions are 3-in-1 coffee, milk and 100 percent natural juice.
Excise tax on these drinks is Php6 per liter of volume capacity for SSBs using purely caloric and purely noncaloric or a mix of both. Php12 per liter of volume capacity for others using purely high-fructose corn syrup or in combination with any caloric or non-caloric sweeteners.
Package 1 also repealed 54 out of 61 special laws with non-essential VAT exemptions thereby making the VAT system fairer. “Exemptions in the tax code are cooperatives (except electric cooperatives), and condominium and association dues. VAT on medicines for diabetes, high cholesterol, and hypertension exempted starting 2019,” Habitan clarified. Meanwhile, exemptions in special laws include PAGCOR and casino, domestic coal, renewable energy, credit surety, countryside barangay business enterprise, mini-hydro, and tourism.
Purchases of senior citizens and people with disability will continue to be exempted from the VAT.
Other excise tax under Package 1 include mining (double the rates from two percent to four percent), cosmetic (a new tax at 5 percent of gross receipts), and tobacco (increase the rate from P31.2 per pack to P32.5 between January to June 2018, P35 per pack from July 2018 to December 2019, P37.5 per pack in 2020 and 2021, and P40 per pack in 2022 and 2023 followed by annual indexation of 4 percent.
Other financial taxes under Package 1 include documentary stamp tax (100 percent increase except for loans which is 50 percent and property, savings, and non-life insurance which has no change), foreign currency deposit unit (increase from 7.5 percent to 15 percent final tax on interest income), capital gains of non-traded stock (increase from 510 percent to 15 percent final tax on net gains), and stock transaction tax (increase from 0.5 percent to 0.6 percent on transaction value).— Carmela Jane F. Villar/PIA-3