The government expects to generate P285.7 billion in net revenue for the first year of implementation of the Comprehensive Tax Reform Program (CTRP)’s five packages, documents released by the Department of Finance (DoF) on Wednesday showed.
CTRP Package 1, which is included in the Tax Reform for Acceleration and Inclusion (Train) bill that was passed by the Lower House of Congress last week, could potentially yield P133.8 billion in net revenue. The bill is now pending at the Senate for approval.
The first package involves lowering personal income tax (PIT) and estate and donor’s tax, but will make up for the consequent revenue loss by plugging tax leakages, limiting value-added tax (VAT) exemptions and adjusting excise taxes on fuel, and improving tax administration.
Packages 2 to 5, which will be proposed to Congress by October this year, are designed to provide a total of P151.9 billion in additional potential net revenue also during the first year of implementation.
The second of the five packages of CTRP seeks to lower the corporate income tax (CIT) rate from 30 percent to 28 percent by 2019 and 25 percent by 2021, and rationalize fiscal incentives to businesses.
Package 2 will be revenue-neutral as the reduction of corporate income tax to P34.8 billion in expected collection will be offset by the P34.8 billion gain seen from the rationalized fiscal incentives for companies.
The “lower CIT must be offset by enough clawback of incentives,” the DoF document said.
Package 3 refers to property taxation, with features such as: implementation of the National Valuation Act; rationalization of capital gains tax on pieces of property; and rationalization of other property-related taxes and fees.
The third package of the CTRP will yield gains of P43.5 billion for the local governments, and will be revenue-neutral for the national government.
“This means the national government can devolve more functions subject to national government supervision,” it said.
Package 4 deals with capital income taxation that seeks to: reduce the tax on interest income earned on peso deposit and investment from 20 percent to 12 percent; increase the capital income tax rates for dollar deposits and investment, dividends, equity, fixed income, and other investments to 12 percent; increase tax on stocks traded in the stock market from 0.5 percent to 1 percent on gross selling prices; and rationalize documentary stamp taxes.
While these measures involve a P1 billion net revenue loss for the government, CTRP Package 5, which includes health, environment and luxury measures, offers potential net revenue of P109.4 billion, according to the document.
The fifth package includes measures such as an increase in alcohol and tobacco excise tax after the mandated review of the Sin Tax Law; increase in cola excise tax; introduction of a carbon tax/environment tax; increase in luxury tax; mining tax review and increase; and introduction of a gambling tax/entrance fees for locals.