Expert sees tax reform to take effect next year

CEBU, Philippines - If not within this year, the tax reform bill of the Duterte administration is expected to be implemented early next year.

Tax expert Raymond Abrea said the earliest the Senate can pass the bill is by September this year.

But before this can be implemented, he said it has go through first the formulation of implementing rules and regulations (IRR) and public information campaign.

"We need to do that kasi this will change a lot the landscape of our tax system. Note that 83 percent of our individual taxpayers will be exempted," the tax reform advocate said in a recent interview.

In his State of the Nation Address (SONA) last Monday, President Rodrigo Duterte asked the Senate to approve his comprehensive tax reform package in full.

"I call on the Senate to support my tax reform in full," Duterte said in his second SONA.

"These reforms are designed to be pro-poor, especially when the people understand how the revenue will be spent," he said.

The House of Representatives passed the tax reform bill last May, which is deemed crucial to the realization of the administration's P8-trillion infrastructure build-up nationwide.

The Senate will need to pass counterpart legislation and reconcile it with the House bill before Duterte can sign the tax measure into law.

The measure is seen to rake in P82 billion in annual revenues, half the projected P162 billion in the original proposal of the Department of Finance.

Duterte had certified the bill as urgent.

"I'm pretty sure it will be implemented early next year if the Senate will heed the call of the President without blindly passing the entire bill – because they will really look into it," said Abrea, founder of Center for Strategic Reforms of the Philippines.

The first package of Duterte's tax reform seeks higher taxes on fuel and cars to offset a planned reduction in personal income taxes.

Based on House Bill 5636 or the Tax Reform for Acceleration and Inclusion Act, effective January 1, 2018 to 2020, those earning no more that P250,000 annually are exempted from income tax.

While those earning P400,000-P800,000 will pay P30,000 plus 25 percent of gross income in excess of P400,000; those earning P800,000-P2 million annually will pay P130,000 plus 30 percent in excess of P800,000; and those earning P2-5 million are to be taxed P490,000 plus 32 percent of annual gross income in excess of P2 million.

Further, those considered the “ultra-rich” or people earning more than P5 million annually will pay P1.45 million plus 35 percent in excess of P5 million.

The proposed comprehensive tax reform is believed to have gone through a very thorough and in-depth study amid oppositions against some provisions of the reform.

The oppositions include the removal of VAT exemption to some sectors particularly the low cost and socialized housing, the imposition of excise tax on fuel products, and the proposed flat 8 percent rate for micro businesses who may be enjoying tax exemption under BMBE law.

These are the tax-generating measures to offset the foregone revenues from lowering income tax. (FREEMAN)