Senate tax reform version is pro-taxpayer


    Deliberations on the first package of the Duterte administration’s tax reform bill – dubbed the Tax Reform for Acceleration and Inclusion (Train) Bill – are on the final stretch, with representatives of the two houses of Congress locked in bicameral conference committee meetings to hammer out a final version for the President’s signature before Christmas.

    Reports coming out of those meetings, however, are disconcerting, to say the least, with the Department of Finance (DoF) standing its ground after the Senate version made – as a department press release describes it – “substantial amendments” to what it impertinently calls its “original version.”

    The DoF is said to be dominating the bicameral deliberations, which is unprecedented because it is primarily a legislative affair, where officials of the Executive department only participate as resource persons, and summoned only when needed.

    The unelected bureaucrats and number-crunchers at the DoF need to be told that legislators, who possess the electoral mandate, have all the right to make changes to what is properly called the DoF “draft.”

    Perhaps, the DoF is blinded by the glowing incremental revenue projections of the House version, which it supports – P129 billion in 2018, against P91 billion in the Senate version.

    The Senate version, however, deserves a second look, as it appears to be the more progressive and reasonable of the two versions.

    What the DoF wants to do, and the House agrees, is to significantly reduce personal income taxes, which would cut tax collections by nearly P140 billion next year.

    How to plug that huge amount by squeezing other revenue sources is the bone of contention.

    The House-DoF consensus is to hike taxes on fuel, cars and sugar-sweetened beverages, as well as remove a number of tax exemptions under special laws, particularly in the value-added tax.

    This dangerous consensus threatens to further weaken, if not kill, the historically important sugar industry and remove the country’s competitive edge in business process outsourcing and shared services.

    The Senate version tweaks the House-DoF proposal and taps other possible sources, such as coal, documentary stamps, cosmetics and capital gains on non-traded stock.

    It is also pro-taxpayer. The Senate version of the Train bill cuts the 12-page income tax return (ITR) for individuals and the eight-page ITR for corporations to just two pages.

    Information required by the ITR will also be limited to personal profile and information; gross sales, receipts or income from compensation for services rendered, conduct of trade or business or the exercise of a profession, except income subject to final tax; allowable deductions; and taxable income.

    The Senate also proposes to reduce the frequency of tax filings, with the percentage tax and VAT to be filed quarterly, instead of monthly.

    Other pro-taxpayer and progressive provisions are the reduction in withholding taxes to 10 percent from 32 percent, and doing away with impractical DoF proposals, such as linking all cash registers nationwide to the Bureau of Internal Revenue in Manila.

    The sweet spot of compromise is, perhaps, somewhere in the middle of the House and Senate revenue projections, while still fulfilling the Duterte campaign promise of a little extra money in the pockets of the working class while raising enough revenues to finance a golden age of infrastructure.


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