DOF readies tax reform package for Congress OK

MANILA, Philippines - A tax reform package and possible lower public float and tax for real estate listing are targeted within six months by Finance Secretary Carlos Dominguez.

“We don’t measure this administration within 100 days. In the case of the President, he wants to lower the crime rate in three to six months so why would I have a different time table?” Dominguez told reporters yesterday.

Dominguez, 71, officially took the reins of the Department of Finance (DOF) from Cesar Purisima at a turnover ceremony yesterday.

Topping his priorities is a “package” of tax reform measures which he intends to submit to Congress for action by September.

Included in the package are proposals to lower personal and corporate income tax rates, adjust income brackets, index inflation and a review of value-added tax (VAT) exemptions.

The Aquino government had rejected proposals to lower income taxes, one of the highest in Southeast Asia, saying it could erode revenues and affect the country’s credit ratings.

Dominguez, in his speech watched by Purisima, criticized this anew. “A major reason why our people decided to vote out the old and vote in a new administration is that certain sense that government has lost touch with its citizens,” he said.

“We save and refuse to spend to shore up our credit ratings, long after it has become unnecessary to do so,” he added.

Aside from tax reform, a review of the Real Estate Investment Trust (REIT) will also be undertaken in hopes of reviving the dormant capital market exercise.

Enacted in 2009, RA 9856 or the REIT law encourages investors to invest in property projects like condominiums and hotels, instead of companies, and earn from their sustained revenue stream.

Firms, however, have neglected REIT after DOF raised the public ownership requirement to 51 percent from 33 percent, and levied a number of taxes on its earnings.

“There has been some discussions about the IRR basically being written in such a way that it really discourages the REIT. Issues of equity, we will certainly look at that very closely,” Dominguez said.

Securities and Exchange Commission chair Teresita Herbosa said she had orders from Dominguez on public float, but that the Bureau of Internal Revenue should take care of the tax treatment.

“We will probably keep it at the minimum as provided in the law. At least 40 percent,” Herbosa said in a separate interview.

“I hope that if we review the minimum float required, relatedly, we will also review the tax treatment so then the prospective REIT issues will not have any excuse,” she added.