DOF unveils tax reform proposal

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The Department of Finance (DOF) has proposed a number of tax reform measures that could gain from P134 billion to P320 billion in additional revenue if implemented, Finance Secretary Cesar Purisima said.

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In a presentation before the American Chamber of Commerce General Membership meeting, Purisima revealed the agency’s long-running study on tax reform, which contains components for a comprehensive tax reform the next administration may consider pushing forward.

This tax reform, if done holistically, has immense potential to re-engineer the Philippine economy toward a more equitable, dynamic, and competitive one, he said.

“The DOF has been making rigorous studies with our multilateral partners like the World Bank and the IMF [International Monetary Fund] on how to go about a holistic, revenue-positive, and equitable package. So far, we’ve heard a lot of interesting ideas,” Purisima said.

Lower tax rates
Under this measure, a P1 million all-in income tax exemption combined with a lower top tax rate from 32 percent to 25 percent “ought to make the tax system more progressive, not to mention induce more buy-in,” Purisima said.

Lowering corporate income tax rates from 32 percent to 25 percent may lead to a P9-billion reduction in revenues, but ought to make for a more competitive Philippines in Association of Southeast Asian Nations, he explained.

These measures, the DOF estimated, would cost the government a loss of P158 billion to P222 billion.

New taxes
Equalizing the tax treatment of self-employed professionals with corporate taxpayers will help compensate for losses from other adjustments, with an expected gain of P2 billion, the DOF chief said.

An even bigger revenue measure, however, is a proposed increase of the excise tax on gas, diesel, and other oil, triggered and pegged with oil prices, which is seen to generate P101 billion.

In addition the reform package expands the value-added tax (VAT) base and increases the tax rate from 12 percent to 14 percent, which is estimated to produce a P162-billion revenue gain.

Making tax evasion a predicate crime to money laundering and repealing bank secrecy for the Bureau of Internal Revenue could add up to P210 billion.

“But I think we ought to make a one-time tax amnesty part of the package to make it feasible,” Purisima said.

From all these, the Finance Secretary said studies project a total revenue gain of up to P320 billion, just for the first year.

“Of course, there ought to be triggers for many of these things to happen. For example, the tax to GDP [gross domestic product]ratio needs to hit a certain level before the tax rates decrease by certain percentage points, over time,” he said.

“These are just ideas we’ve explored with technical experts and multilateral partners over time but have not come to fruition nor have been considered with finality due to timing and political realities. We’re looking forward to passing this on to the next administration to continue to study,” he added.

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5 Comments

  1. Hector David on

    Purisima has all these bright ideas as he leaves .. where were those for 6 years .. he was bleeding the people and small business intaxes to look good…. by making the country investment grade while corruption and misuse of funds skyrocketed…more people are hungry and jobless. Our debts have increased in spite of a 300% .increase in budget. ..in spite of bullshit talk on savines ….. one word to describe his finance management …failure…… just …window dressing

  2. These proposals are examples of economics for the rich. Anti poor and counter productive

  3. This tax proposal is an idiotic expression of moronic mind. The proposal simply says: Lower income tax,lower corporate tax and to balance this raise excise tax for oil at Ph6.00 per ltr. And on top of this raise vat from 12% to 14%. Question: How many workers are earning more than Ph 300k per annum? Whose not using oil and oil products? 12% vat is too high why add 2% More? Vat acceptable is 1% only so people can enjoy life. This proposal if accepted will be bad for next administration?

  4. Ione M. Belza on

    Digong says that we will have a uniform tax rate? amilyar no more,excise tax etc and all earnings 25,000 pesos below will be tax free. You just lower the tax Mr. Domiguez. Please make this promise by digong to become true , because we trust every single word he say. Government must subsidized fare on transportation. I agree on higher taxes on imports, cigarettes, liqour, mining , foreign acts and lesser on exports. No tax on basic commodities , food.

  5. artemio gonzales on

    Tax reform should include 2 principles.

    1.) No tax on income.
    2.) Govt revenue must only comes from taxes on exchange of goods and services.