THE fulfillment of the government’s ambitious infrastructure program is partly dependent on the implementation of the comprehensive tax reform proposed by the executive department. However, the Senate is not keen on passing the tax measure that Malacañang has been pushing.
While Sen. Juan Edgardo “Sonny” Angara, chairman of the Senate ways and means committee, expressed optimism that the chamber will pass its version of the Tax Reform and Acceleration and Inclusion (Train) bill this year, he admitted that it might be different from the version of the executive.
The House of Representatives has approved on third and final reading the first package under the Train bill or House Bill 5636 that includes revisions to the outdated income tax bracket schedule, value-added tax (VAT) exemptions, and the imposition of excise tax on oil, automobiles and sweetened beverages.
The finance department expects to generate an additional P130 billion in revenues on the first year of the proposed law’s implementation.
The Senate’s ways and means committee has completed its committee report on the Train bill and is now tackling the first package of the tax reform measure.
“The pace of the deliberation will be up to the Senate leadership and the other senators. I’m sure our colleagues will prioritize the passage of the bill with the president’s certifying the bill as urgent,” said Angara, the sponsor of the bill.
During the committee deliberations on the measure, the panel introduced changes in order to temper the bill’s impact and to make it more “pro-people.”
Among the changes were the exclusion of three-in-one coffee mixes and milk from the list of items that will be covered by the proposed excise tax on sugar-sweetened beverages.
Angara’s committee also convinced the Finance department to lower the rate from P10 to P5 per volume liter on the condition that the revenues that would be lost from the amendment would be recovered elsewhere.
The ways and means committee also excluded kerosene and reduced rates for liquefied petroleum gas (LPG) in the proposed petroleum excise tax.
Kerosene will also not be covered by the petroleum excise tax, while liquefied petroleum gas (LPG), used by most households in cooking, will be imposed lower tax rates.
Angara said they also pushed for the retention of the VAT exemption for socialized and low-cost housing.
“The committee is also lowering and adjusting the increases of excise tax on oil, sweetened beverages, and automobile,” the senator said.
Angara said that even if the Senate’s version of the bill calls for the lowering of tax rates, the chamber is confident that government will be able to raise the P130 billion expected revenue in the first year of Train’s implementation.
The Bureau of Internal Revenue may even exceed the target through an efficient tax collection, he added.
However, Angara said the government must not only rely on new taxes but also work double time in curbing corruption and improving efficiency at the BIR, Bureau of Customs and other collecting agencies.
“An efficient bureaucracy not only provides better revenue but will also provide better service to our people,” he added.
Sen. Sherwin Gatchalian had warned that car smuggling may become rampant once the government imposes additional excise taxes on the sale of luxury vehicles.
“If this happens, it should not be business-as-usual for the Bureau of Customs. The BOC should be ready to deal with these smugglers,” said Gatchalian, chairman of the Senate committee on economic affairs.
Importers and distributors of high-end ultra-luxury vehicles told the ways and means panel that an estimated 20 percent of cars sold are smuggled by unscrupulous traders through the country’s various ports.
The figure could increase when car dealers and traders use backdoor channels to bring in their products to escape paying proper duties and taxes.
Where taxes will go
The ways and means committee had specified projects and programs where the taxes raised from the Train bill. These programs include the free college, expansion of free dialysis coverage, and improvement of public transportation system.
“We want to make this tax reform measure complete and more acceptable to the public by specifying in the bill where the revenues will go,” Angara said.
The senator wants the incremental revenues of the proposed increase in the excise tax for automobiles, which is estimated at P14 billion, allocated to projects that will improve the public transport system especially the Light Rail Transit and Metro Rail Transit.
Part of the incremental revenues from the proposed excise tax on sugar-sweetened beverages, estimated at P47 billion, should go to the government health insurance system or Philhealth to expand the beneficiaries of its dialysis package.
The government must also allot a portion of the revenue collected from the Train bill to fund the free college law which, according to the Commission on Higher Education, needs at least P20 billion for state and local universities and colleges, and P3 billion for technical-vocational institutions.
“We will try our best to come up with something that is both fair to the government and tax payers,” Angara said.