TRAIN falls short of revenue target

MANILA, Philippines — The final version of the tax reform bill may yield only about two-thirds of the P134 billion in additional revenues originally programmed under the new measure, the Department of Finance (DOF) said yesterday.

In a statement, Finance Secretary Carlos Dominguez III said the final approved version of the Tax Reform for Acceleration and Inclusion (TRAIN) Act is expected to generate a fraction of the expected revenues under the bill.

According to the government’s 2018 budget program, the projected revenues under the TRAIN bill was originally estimated at P134 billion in the first year of its implementation.

Despite this, Dominguez remained optimistic the government would be able to raise enough funds for its infrastructure, human capital development and social protection projects as additional provisions are set to be discussed by the Congress next year.

“(The Duterte administration is) on track to meet its revenue targets as the final approved version adopted is equivalent to about two-thirds of programmed incremental revenue under the TRAIN,” Dominguez said.

“The Congress will continue to tackle the remaining one-third in early 2018 to complete the first package under the Duterte administration’s Comprehensive Tax Reform Program (CTRP), enabling the government to meet its target of raising enough funds for infrastructure, health, education, social protection and other programs to harness our human capital,” he added.

Finance undersecretary Karl Kendrick Chua said the remaining one-third involves provisions on the estate tax amnesty, a general tax amnesty, the adjustments in the Motor Vehicle Users Charge, amendments in the bank secrecy law and automatic exchange of information.

The TRAIN Act, which contains the first package of the DOF’s CTRP, aims to simplify the country’s tax system.

The DOF accommodated a number of other provisions that lawmakers wanted to include in the first Tax Reform for Acceleration and Inclusion (TRAIN) bill.

Among the provisions that were not originally proposed by the DOF, but inserted in the final TRAIN bill, include the increase in excise taxes on coal, minerals, tobacco, and the introduction of a cosmetic levy.

Under the Bicam-approved TRAIN bill, coal excise tax rate will be raised from the current P10 per metric ton to P50 per metric ton in the first year of implementation, P100 in the second year, and P150 in the third and succeeding years.

The increase in coal tax was originally planned for the DOF’s tax reform package five.

The P10 coal excise tax rate has remained unchanged since 1988 while the local industry has been exempted from paying excise tax since 1976.

Asked if the insertion of the coal tax could pose a legal question later on as this provision did not originate from the lower House, Dominguez said the levy is not considered a new tax, saying the bicam only adjusted the three-decade old coal tax rate.

Aside from coal, the final bill also doubled the tax rates of all non-metallic minerals and quarry resources, as well as metallic minerals including copper, gold and chromite from the current 2 percent to 4 percent; and on indigenous petroleum from the current 3 percent to 6 percent.

The lawmakers also decided to increase the rates of the tobacco excise tax from the present P30 per pack to P32.5 in the first half of next year and to P35 starting July 2018 to December 2019.

Between 2020 and 2021, the tobacco excise taxes will further rise to P37.5 and from 2022 to 2023, the rate will increase to P40.

From 2023 onwards, the levy on cigarettes will jump 4 percent annually.

Starting next year,  a five percent tax will be collected from invasive cosmetic procedures, surgeries, and body enhancements aimed at improving, altering, or enhancing the patient’s appearance.