IN the first three years of his administration, President Rodrigo Duterte has kept most of his campaign promises of reforming the country’s tax system and leveling the playing field in the business sector.
One of his top accomplishments during his three years in office was the passage of the Tax Reform for Acceleration and Inclusion Law or Train.
Implemented at the start of 2018, Package 1A or the Train law exempts those earning annual taxable incomes of P250,000 and below from paying personal income taxes. In exchange, new taxes were imposed on automobiles, fuel and sugar-sweetened beverages, among others.
The law also removed the value-added tax (VAT) on medicines for diabetes, hypertension and high cholesterol; and lowering estate and donor taxes to a single rate of 6 percent to free up idle real properties for productive use.
Latest available data showed that combined Bureaus of Internal Revenue (BIR) and of Customs (BoC) collections from the Train law reached P91.3 billion in the first nine months of 2019. This was 107 percent higher than the actual Train revenues from January to September 2018.
Total revenues for the nine months to September were said as to have surpassed the government’s P77.3 billion estimate for the period by P14.1 billion or 18.2 percent.
With the strength of Train and tax administration reforms, the BIR and BoC managed to collect over P2.8 trillion, combined in 2019, with the internal revenue agency posting a 10.67-percent increase in collection to P2.33 trillion and the customs bureau collecting 6.32 percent higher with P630.57 billion.
Overall, government revenue in 2019 reached P3.13 trillion, missing the P3.14-trillion program by 0.39 percent but up 10.08 percent from 2018’s P2.85 trillion.
This translated to the highest revenue effort of 16.86 percent, 0.5 percentage points higher from 16.36 percent in 2018. Tax effort also rose by 0.47 percentage points from 14.72 percent to 15.19 percent — the highest in 22 years.
Meanwhile, the Department of Finance (DoF) has said that the Train’s income tax cuts for 99 percent of Filipino taxpayers provided more money in their pockets or equivalent to one-month’s take home pay. This boosted strong consumer spending that helped fuel growth in 2019’s fourth quarter.
The country’s gross domestic product growth in the fourth quarter of 2019 was recorded at 6.4 percent, bringing the full-year economic expansion to 5.9 percent.
Another game-changing reform of the Duterte administration is the passage of the Package 2 Plus of the government’s comprehensive tax reform program.
The measure, or Republic Act (RA) 11467, was signed into law on January 23. It imposes additional “sin” taxes on alcohol, heated tobacco and vapor products.
The Finance department estimated earlier that the net incremental revenue from the measure to reach P17.1 billion this year.
Another milestone of the Duterte administration is the passage of the RA 11203 or “Rice Tariffication Law” that took effect in March last year.
Under the law, P10 billion from its proceeds was earmarked for the Rice Competitiveness Enhancement Fund, which will finance the modernization of the country’s rice industry and provide farmers with access to credit and training as well as funds for mechanization, high-quality seeds and fertilizers, among others.
Tax collections from rice imports covered by the law reached P12.3 billion in 2019, “assuring the government of sufficient financing support for the P10-Billion Rice Competitiveness Enhancement Fund,” the DoF said.
The Duterte administration also passed an estate tax amnesty program under the partially vetoed RA 11213 or the Tax Amnesty law in 2019.
The amnesty covers the estate of the deceased who died on or before December 31, 2017. An estate tax amnesty rate of 6 percent with a minimum tax amnesty amount of P5,000 shall be imposed on the deceased’s total net taxable estate at the time of his or her death without penalties at every stage of property transfer.
The BIR expects to collect some P6.28 billion from the program.
On the other hand, the Duterte administration’s campaign against delinquent offshore gaming operators resulted in a P6.42-billion tax collection last year.
The figure was 169.74 percent higher than the collection of P2.38 billion from the Philippine offshore gaming operator (POGO) sector in the previous year.
Broken down, the BIR collected P5.13 billion in withholding taxes, P644.07 million in income taxes, P91.13 million in VAT and percentage taxes, P81.11 million in documentary stamp taxes and P469.13 million in other taxes from POGOs.
In terms of leveling the business playing field, the Duterte administration enacted into law in August 2018 the Personal Property Security Act (PPSA), also known as RA 11057.
The PPSA aims to promote economic activity by increasing access to least-cost credit, particularly for micro, small and medium enterprises (MSMEs) by establishing a unified and modern legal framework for securing obligations with personal property.
It also seeks to increase access to credit of MSMEs as well as farmers and fisherfolk.
Under the PPSA, MSMEs, farmers and fisherfolk can now secure their borrowings by using nontraditional collateral such as account receivables, inventory, negotiable instruments, electronic securities, crops, livestock, consumer goods, machinery and equipment as well as intellectual property rights.
The law also provides that future property can now secure a borrower’s financial needs through the creation of a security interest in the security agreement; however, the security interest in that property is created only when the borrower acquires rights to it or the power to encumber it.
Lastly, the Duterte administration established the Anti-Red Tape Authority (ARTA) in line with the requirements under the Ease of Doing Business law, which is an act that aims to streamline the current systems and procedures of government services.
It is the landmark law of the Duterte administration that addresses priority number 3 of its 0+10 Point Socioeconomic Agenda. This particular agenda pertains to improving the competitiveness of and ease of doing business in the Philippines. The law was signed in May 2018 and effectively amends Republic Act 9485 or the Anti-Red Tape Act of 2007.