Government to lose P173 B annually with lower taxes – DOF

MANILA, Philippines - The administration of President Duterte stands to lose some P173.8 billion every year if its plan to lower personal and corporate income taxes is carried out, Finance Secretary Carlos Dominguez said yesterday.

“The lowering of income tax rates will bring down revenues by approximately P139 billion and the lowering of corporate income tax rates will bring down our revenues by approximately P34.8 billion,” he told the House appropriations committee.

Dominguez made the forecast at a briefing by the Development Budget Coordinating Committee to the House panel headed by Davao City Rep. Karlo Alexei Nograles.

Duterte has promised to reduce from 32 percent to 25 percent the individual tax rates for fixed-income earners, and from 30 percent to 25 percent the corporate tax being paid by local and foreign businessmen.

He said the government is also eyeing to “eliminate the zero-rated VAT transactions.”

In adjusting to inflation the excise tax on oil products, Dominguez said the tax on petroleum products would be P10 per liter.

“We are contemplating on making that proposal. At the moment, the excise tax for example on fuel is P4.35 per liter and this was set in 1997. If we were to adjust it to inflation, the amount should be roughly an increase of P5.65 per liter or a total of P10,” he said.

The DBCC will also be proposing to the House, under the leadership of Speaker Pantaleon Alvarez, tax on sugary and fatty foods to discourage the public from patronizing unhealthy products.

Also yesterday, the Department of Finance chief said Duterte wants to bring down the country’s current 26 percent poverty rate down to 17 percent by the end of his term, or in 2022.

To achieve such goal, the government needs to lower taxes, broaden the tax base and allow a budget deficit to allow infrastructure spending.

“Lower tax rates do not necessarily mean lower revenue intake so long as tax base is broadened and tax administration is improved,” he told members of the Nograles committee. Dominguez expects the foreign and domestic borrowing mix to be at 34:66.

In the same briefing, Budget Secretary Benjamin Diokno said the administration would stick to deficit spending. “Having a balanced budget is not advisable. We need to invest in the future of our people,” he said.