Tax reform in SONA opens door to early implementation

MANILA, Philippines – The inclusion of tax reform in President Duterte’s first State of the Nation Address (SONA) could fast-track its realization early in his term, the government and the tax industry said.

“(It) will let the new government put on the fast lane its 10-point socioeconomic agenda for a genuinely inclusive growth,” Finance Secretary Carlos Dominguez said in a statement.

The agenda, unveiled during the transition period, included plans to amend the nearly two-decade-old National Internal Revenue Code of 1997 to achieve a “progressive” tax system.

In his 98-minute SONA, Duterte said the government would work to lower personal and corporate income tax rates, something which the previous administration has opposed.

Benedict Tugonon, president of the Tax Management Association of the Philippines, welcomed Duterte’s pronouncements.

“We don’t see any reason why the passage of the comprehensive tax reform measure will not materialize during the early part of his term,” he said in a separate statement.

While details are yet to be revealed, Dominguez earlier said his department will be crafting a set of tax reform measures which they intend to submit as a bill to Congress by September.

Aside from lowering the country’s income tax rates, one of the highest in Southeast Asia, an increase in excise tax on oil, value-added tax rate, as well as relaxation of bank secrecy law are also being studied.

On personal income tax, there were earlier pronouncements on lowering the rates to a maximum of 25 percent from current 32 percent. Tax brackets will also be revised.

Tugonon said TMAP also supports the lifting of bank secrecy law for tax purposes, which did not move forward during the previous Congress.

“With the lowering of income tax rates, which will result in revenue erosion, the need to significantly increase the tax base and improve voluntary compliance cannot be overemphasized,” Tugonon said.

“This is where all of us can help push for tax reform by having a tax-conscious, vigilant and involved mindset,” he added.

Dominguez said Duterte’s SONA underscored programs that will help recent strong economic growth trickle down to ordinary Filipinos.

“These sweeping initiatives are for us in government to carry out and for Filipinos and private business to give their full backing to in order to guarantee a sustained high – and inclusive – growth for all,” he said.

“The chief executive has spelled out what needs to be done between now and 2022 that will enable his administration to bequeath to the next one a country that is much safer and an economy that is even stronger and more inclusive...,” he added.