Additional TRAIN measures to be passed in 2018

MANILA, Philippines — The Department of Finance (DOF) expects Congress to approve early next year additional provisions to be included in the tax reform bill, which will plug the shortfall in revenues to be generated by the recently ratified tax measure.

In an interview, Finance Secretary Carlos Dominguez III said the Tax Reform for Acceleration and Inclusion (TRAIN) Act – which contains the first package of the DOF’s Comprehensive Tax Reform Program (CTRP) – has been divided by the Congress into package 1A and 1B, the latter of which will be discussed in the first quarter of 2018.

“We said Package 1 has become Package 1A and 1B. The legislature has committed they will pass the second part of the package by the first quarter of next year,” Dominguez said.

Package 1A constitutes the measures already ratified by both chambers of Congress, including the reduction of personal income taxes, adjustments in the excise tax of fuel, automobiles and imported coal, and the expansion of the value-added tax base, among others.

Dominguez said this is expected to yield only two-thirds of the P134 billion projected gain from the TRAIN, as reflected in the 2018 General Appropriations Act.

The remaining one-third, he said, would be part of package 1B, which involves the proposed tax amnesty program, adjustments in the Motor Vehicle Users Charge, and amendments to the Bank Secrecy Law.

With both packages combined, the finance chief said the government could gain around P130 billion from the TRAIN bill.

Despite deviations from the original DOF proposal of TRAIN, Dominguez still welcomed the final ratified version of the tax reform bill, saying it is “a step forward.”

“We understand that the administration does not always get 100 percent of what it wants. This is something, though, that is a step forward. In other words, when they ratified it on Wednesday, we have a brighter future than what we were looking at last Tuesday,” Dominguez said.

 “It’s the first time we have done a tax reform without any pressure from the outside, no crisis, no external pressure. So I think its a sign of maturity for our country,” he added.

Dominguez also emphasized the tax reform bill, the first of five packages, will be key to fixing the structural problems of the tax system, which he said had become “unfair, complex and inefficient.”

“Package one also raises significant revenues to fund the President’s priority and social infrastructure programs to reduce poverty to the targeted 14 percent by 2022 from 21.6 percent. About 70 percent of the incremental revenue will go to infrastructure, while the balance will go to social services,” he added.

According to Dominguez, the DOF is also gearing up to submit to Congress the second package of the CTRP, which will seek to reduce corporate income taxes, while rationalizing the fiscal incentives of enterprises.