THE Social Security Commission (SSC) fully supports of the proposed Comprehensive Tax Reform Program (CTRP) to make the country’s taxation simpler, fairer and more efficient.
In a resolution released Tuesday, the SSC said the measure now pending in Congress would create more jobs and further “invigorate” the economy. In turn, it would have a “positive effect” on the financial viability of the pension fund for private sector employees.
SSC is the governing body of the Social Security System (SSS).
“Resolved, that the Commission express, as it hereby expresses, its full support to the comprehensive tax reform package being proposed to Congress by the Department of Finance as the tax reform would generate more employment and further invigorate the domestic economy with positive effect to the financial viability of the Social Security System,” according to Resolution 280-s. 2017.
SSS Chairman Amado Valdez, Vice Chairman and President Emmanuel Dooc and SSC members Diana Pardo Aguilar, Arthur Amansec, Jose Gabriel La Viña, Anita Bumpus Quitain, Michael Regino and Gonzalo Duque, as well as Labor Secretary Silvestre Bello 3rd, as ex-officio member, signed the resolution.
SSC Secretary Santiago Agdeppa furnished Finance Secretary Carlos Dominguez 3rd a copy of the resolution.
“This is to respectfully furnish the Secretary of the DoF for his information, a copy of SSC Resolution 280-s.2017 pertaining to SSC’s full support of the comprehensive tax reform package being proposed by DoF to Congress,” Agdeppa said.
Finance Undersecretary Karl Kendrick Chua said “substantial progress” has been achieved in the CTRP bill after the House ways and means committee voted on May 3 to pass a substitute measure drafted by the panel’s Technical Working Group (TWG).
The substitute bill supposedly entail moderate changes from the original measure that the DoF submitted to the Congress in September last year.
Chua hopes that the House of Representatives would pass the tax reform measure before the legislature adjourns on June 2. “Substantial progress has been achieved in the House of Representatives,” he said.
“We remain hopeful that with this committee vote for the substitute bill, the tax reform measure can still be approved at least by the House of Representatives before the Congress ends its first regular session this June. We will also convince the plenary to include some original provisions that were removed,” he said.
The substitute bill, which the House committee chaired by Quirino Rep. Dakila Carlo Cua approved on May 3 by a 17-4 vote with three abstentions, consolidated the first package of the CTRP with 54 other similar tax bills into the DoF-endorsed HB 4774.
Dominguez said the first package aims to help raise enough cash for the expenditure program to sustain growth, support the golden age of infrastructure, accelerate poverty reduction and transform the Philippines into an upper middle-income economy by 2022.
“Malacañang’s plan to accelerate spending on infrastructure and on human capital by upgrading the country’s educational and health care systems, along with its goal to lower income tax rates to sharpen the Philippines’ global competitiveness, would require additional revenue measures that could only be generated in part via the CTRP,” he said.
Dominguez said the CTRP bill would be the “cornerstone” of funding for the government’s ambitious “build, build, build” infrastructure program, which will require some P8.4 trillion until 2022.
Cua cited the key features of the substitute bill:
1) Lowering of personal income tax rates
2) Flat rate of 6 percent for estate and donor’s taxes
3) Broadening the tax base by removing special laws on VAT exemptions
4) Staggered “3-2-1” excise tax increase for petroleum products from 2018 to 2020
5) Five-bracket excise tax structure for automobiles
6) Earmarking 40 percent of the proceeds from the fuel excise tax increase for social protection programs
For the value-added tax (VAT), the exemptions threshold was increased to P3 million and indexed to inflation every three years.
The zero-VAT rate was also retained for the renewable energy sector and limited to direct exporters, pending the establishment of the DoF-proposed cash refund system, in which refunds can be obtained by the beneficiary-taxpayers within 90 days of their application for such exemptions.
For the self-employed and professionals within the VAT threshold of P3 million, Cua said the substitute bill require them to pay an 8-percent tax on gross sales or receipts in lieu of the income and percentage taxes.
The tax for those above the VAT threshold is based on the 30 percent corporate income tax rate with minimum tax, Cua said.
He said the Optional Standard Deductions was retained at 40 percent but now based on gross income under the substitute bill.
This substitute bill adopted the DOF proposal to subject lottery and sweepstakes winnings from the Philippine Charity Sweepstakes Office to a 20 percent passive income tax in lieu of the lower 5 percent prize fund tax.
Another DOF proposal adopted under the substitute bill was the removal of the 15-percent tax rate for the employees of the Regional Operating Headquarters of multinational corporations, which are foreign business entities whose purpose is to service affiliates, subsidiaries or branches in the Philippines and other foreign markets.
As proposed by the DOF, Cua said the fringe benefit tax will be initially lowered from 32 percent to 30 percent in the first three years and then incorporated in the gross income of taxpayers.
Cua said the original proposal of staggering the P6 tax increase tax on fuel products to P3 in the first year, P2 in the second year and P1 in the third year was adopted, but with no indexation to inflation.
The automobile excises were given five brackets under the substitute bill, which also set a two-year phase-in period of implementation, he said. Pickups are exempted under the substitute bill, as well as hybrid cars that can run 30 kilometers on a single charge.