The Department of Finance (DoF) said the proposed second package of the Comprehensive Tax Reform Program (CTRP) will be submitted to the Congress by the fourth quarter of the year.
“The second package will involve the dropping of the tax rate for corporates. In exchange, we will review all fiscal incentives being handed,” Finance Secretary Carlos Dominguez 3rd on Monday told reporters.
The second of four packages of the comprehensive tax reform program seeks to lower corporate income tax to 25 percent, from 30 percent, and rationalize fiscal incentives to businesses.
“You know, I look at it as the money of the Filipino people. Right? So if we give up something, they must get something. Right? Because some guys are going to benefit, but the guys who get that benefit must also benefit the rest of society,” Dominguez said.
In terms of revenue potential, Finance Undersecretary Karl Kendrick Chua earlier said the CTRP Package 2 is neutral.
“As I explained before, lower income tax for corporate and rationalization of fiscal incentives is an equity measure, and not a revenue measure. It’s for fairness,” he said.
On Monday, the DoF said President Rodrigo Duterte certified as urgent the Tax Reform for Acceleration and Inclusion Act (TRAIN), which encompasses CTRP Package One.
“We are transmitting this letter of President Rodrigo Roa Duterte certifying to the necessity of the immediate enactment of House Bill [HB] 5636 (the proposed Tax Reform for Acceleration and Inclusion Act), ” Executive Secretary Salvador Medialdea was quoted as saying in a letter to House Speaker Pantaleon Alvarez on May 29.
“The benefits to be derived from this tax reform measure will sustainably finance the Government’s envisioned massive investments in infrastructure thereby encouraging economic activity and job creation, as well as fund the desired increase in the public budget for health, education and social programs to alleviate poverty,” President Duterte said in a separate letter sent to Senate President Aquilino Pimentel 3rd.
Dominguez hopes the House of Representatives could pass the TRAIN before Congress goes on sine die adjournment on June 2.
Both the House and Senate will reopen for the Second Regular Session of the 17th Congress on July 24, and President Duterte will deliver his second SONA.
“We believe that the President’s certification of the tax reform bill as an urgent legislative measure can help ensure timely and full passage of the tax reform package before the close of the session on June 2, 2017, so that the benefits of the reform can be felt sooner,” Dominguez noted in a memo to the President.
TRAIN aims to make the country’s antiquated tax system simpler, fairer and more efficient by making sizable cuts in personal income tax rates. It will expand the value-added tax (VAT) base and adjust excise taxes on oil, automobiles and other products.
The DOF submitted the first CTRP to the Congress on September 26. It was filed as HB 4774 in January 2017 by Rep. Dakila Carlo Cua of Quirino, the chairman of the House ways and means committee.
After 13 public hearings in four months, the committee approved on May 8 the substitute measure—HB 5636—that consolidated HB 4774 with 54 other tax-related bills.
HB 5636, which had over a hundred co-authors by the time the Cua-chaired panel formally submitted it for plenary deliberations on May 23, was also taken up and approved by the House committee on appropriations.
HB 5636 also includes administrative reforms such as the fuel marking and monitoring system to curb oil smuggling, the use of electronic receipts and the mandatory connection of the point-of-sale system of all establishments to the BIR, and the relaxation of bank secrecy laws for investigating and combating tax fraud.