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PH soon an upper-middle income country – DoF

THE Philippines is on its way to becoming an upper-middle income country in 2020 as the country’s Gross Domestic Product has remained robust despite headwinds in the global economy, the Department of Finance (DoF) said on Thursday.

Finance Undersecretary Karl Kendrick Chua told the Senate Ways and Means committee, headed by Sen. Pilar Juliana “Pia” Cayetano, that with higher growth, the Philippines was well on its way to being an upper-middle income country.

Finance Undersecretary Karl Kendrick Chua talks during the Senate Ways and Means Committee hearing. PHOTO BY J. GERARD SEGUIA

Chua said the Duterte administration managed to pass two tax packages, the first of which was the Tax Reform for Acceleration and Inclusion (Train) Act that took effect in 2018.

The Train Law cut income tax rates, but jacked up excise taxes on consumption of cigarettes, oil products, sugary drinks and vehicles, among other goods and services.

Chua noted that the Train Law generated P68.4 billion in net revenue last year, 8.1 percent higher than the P63.3-billion target.

“The largest gains were seen in tobacco excise, auto excise and documentary stamp tax collections. Personal income tax collections were also higher than expected due to better compliance and an increase in the number of registered taxpayers. Taken together, these highest gainers contributed around P51.5 billion of the P68.4-billion additional revenue from Train,” he said.

Auto excise taxes surpassed target by P6.2 billion, while collections from higher documentary stamp taxes were above-target by P4.7 billion.

Accounting for value-added tax from additional spending — estimated at P24.6 billion, which was due to additional take-home pay as a result of lower personal income taxes — Train revenue far exceeded its target, providing additional public resources for infrastructure and human capital development programs.

The restructured personal income tax system that raised the tax-exempt cap to P250,000 allowed workers to receive an additional P111.7 billion last year.

“The implementation of Train gave a combined P12 billion per month in additional income to the country’s individual taxpayers, most of them compensation earners, and in unconditional cash transfers to the poorest households and senior pensioners,” Chua said.

In February, President Rodrigo Duterte signed into law package 1B under Republic Act 11213, or the “Tax Amnesty Act of 2019,” which paved the way for estate tax and delinquencies amnesties.

The DoF estimated additional revenue from the one-year amnesty on delinquencies to reach P21.26 billion.

Estate tax amnesty, meanwhile, was expected to generate P6.28 billion during its two-year implementation.

Pending in Congress are five more tax packages, including package 1C, which aims to jack up the rates of the motor vehicle user’s charge.

Package 2, or the Tax Reform for Attracting Better and Higher Quality Opportunities bill, meanwhile, aims to not only reduce the corporate income tax rate, currently the highest in Southeast Asia, but will also rationalize the tax and non-tax incentives being enjoyed by investors to reduce foregone revenue for the government.

Package 2 Plus covers higher excise taxes on “sin” products such as tobacco and alcoholic drinks, with an increase in rates for cigarette products already approved by Congress.

As for packages 3 and 4, these proposed tax reforms seek to make property valuation and taxation of capital income and financial services simpler, fairer and more efficient.

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Today’s Front Page December 12, 2019

Today’s Front Page December 12, 2019