2018 budget ‘difficult’ without tax reform


It will be difficult for the government to formulate its revenue and expenditure assumptions for 2018 without a comprehensive tax reform program, Socioeconomic Planning Secretary Ernesto Pernia said.

Pernia was referring to the impact of the delay in the passage of the Comprehensive Tax Reform Bill, which to date remains pending before the House Committee on Ways and Means.

Most of the assumptions that were supposed to be part of the 2018 national budget were based on calculations that took into consideration a tax reform package in place.

Pernia has said the tax reform program should be approved by the Congress to create balance between lower revenue and compensation for the revenue loss.

“[The delay] will make the 2018 budget difficult because the measure is still uncertain. So I don’t know which assumptions to apply,” Pernia told reporters late last week.

The income tax cuts and accompanying revenue measures in the tax reform package were submitted by the Department of Finance to the Congress in September.

The first package of the program aims to generate a net gain of P174 billion, equivalent to 1 percent of the gross domestic product in 2018.

The package aims to make the tax system more progressive by lowering the personal income tax (PIT) rates to a level that is on a par with the region. It seeks to expand the value-added tax coverage by limiting exemptions to raw food, education and health care, while increasing excise taxes on oil and automobiles.

The DOF has said a quarter to a third of the net gain from the proposed reforms would be allocated to conditional cash transfers, lifeline electricity subsidies, direct discounts and higher Philippine Health Insurance Corp. (PhilHealth) coverage, among other targeted subsidies, for the sectors to be affected by higher fuel prices from adjustments in the excise tax on petroleum products.


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