DOF proposes tax reform bill to incoming government

Prinz Magtulis - The Philippine Star

MANILA, Philippines - Lower income taxes and higher excise levies are among the components of a bill to be turned over by the Aquino administration to the next government aiming to amend a wide range of tax policies.

“What we are going to give is not a stand alone proposal. Everything will be part of a comprehensive tax reform,” said Elsa Agustin, director at the Department of Finance (DOF).

“We want a fiscally positive reform,” she said in a tax forum in Makati City Tuesday.

Under the proposal, “higher” excise taxes, particularly in oil, are being eyed, while making changes in both individual and corporate income taxes, considered the highest in Southeast Asia.

“We recognize there is a need to reform individual income tax and corporate income tax, but we want it done in a fiscally responsible way,” Agustin said.

Agustin declined to provide details such as the tax rates or structure being considered as the proposal would still undergo stakeholder consultations.

Last year, the Aquino administration successfully blocked a push from both houses of Congress to lower income tax rate to a maximum of 25 percent from 32 percent.

The DOF said the measure, if enacted, will result in P30 billion in revenue losses in the first year of implementation.

Around that same amount – P33.96 billion – was the additional revenues from the first year of RA 10351, which increased excise taxes in tobacco and alcohol products beginning 2012.

Marikina Rep. Romero Quimbo, chairman of the House ways and means committee where tax proposals should emanate, said he would “absolutely” prioritize tax reform in the next Congress.

“It is a pity the DOF is only sending their bill when the current administration is about to end its term,” Quimbo said in a text message.

“They should have done their job earlier, rather than later,” he added.

Explaining the logic behind revisiting oil excise taxes, Agustin said revenues from the commodity have been declining as percentage of gross domestic product since 1995.

“The rich consume most of the petroleum products so it tells us that there is a very compelling reason for reform. Declining taxes only benefit the rich,” she said.

Benedict Tugonon, president of Tax Management Association of the Philippines (TMAP), said the next government should prioritize amending the National Internal Revenue Code.

“It’s a difficult process, we all know that,... but we should start tax reform now. It should be an election issue,” Tugonon said in the same forum.

As part of the last presidential debate on April 24, TMAP launched a 24-question tax policy survey for the candidates that cover topics such as income tax, value-added tax, tax administration and changing tax incentive rules.

Survey results will be published this month.          

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