DOF presses TRAIN 2 passage

MANILA, Philippines — As consumers try to come to terms with rising prices stemming from a newly enacted tax reform law, the Department of Finance (DOF) is pushing for the swift passage of the law’s second phase to ensure the government’s fiscal position remains stable and its deficit target attainable.

In a press briefing at Malacañang, Finance Secretary Carlos Dominguez III yesterday said the P89.9 billion in projected revenue for this year from Package 1A of the Tax Reform for Acceleration and Inclusion (TRAIN) law corresponds to only about two-thirds of the P134-billion original revenue target intended under the measure, as reflected in the 2018 national budget.

He explained the lower-than-expected revenue gain from the tax reform law could widen the country’s fiscal deficit in 2018 to 3.3 percent of the gross domestic product (GDP) unless Congress approves additional revenue-generating measures.

In the absence of additional revenues, fiscal deficit for this year might expand to higher than the three percent of GDP target for the period.

“Package 1B is crucial to keep the three percent of GDP deficit target,” Dominguez told reporters.

According to DOF estimates, Package 1B is seen to increase the government’s revenues by P38.9 billion, resulting in incremental revenues of P128.8 billion when combined with Package 1A.

Package 1A, signed into law last Dec. 19, involves the reduction of personal income taxes, adjustments in the excise tax of fuel, automobiles and imported coal and expansion of the value-added tax base, among others.

Package B will comprise an estate tax amnesty program, adjustments in the Motor Vehicle Users Charge and amendments to the bank secrecy law. The measures are expected to be tackled by Congress in the first quarter of this year.

“We will need to pass packages 2 to 5. No succeeding packages means either a bridge of this deficit which will hurt our economy or a cut in government spending, possibly compromising the President’s infrastructure program,” Dominguez said. “If Congress does not pass sufficient tax reform, either the deficit will be breached or spending needs to be cut.”

Asked if Duterte would certify the tax reform packages as urgent, the finance chief replied: “We have to re-certify this. Yes, he will.”

In the next five years, Dominguez said Package 1A of the tax reform program will raise P786 billion in incremental revenues. With Package 1B, the amount is estimated to jump to P969.2 billion by 2022.

“These revenues will fund the President’s priority social and infrastructure programs,” he said.

The Duterte administration is planning to embark on a massive infrastructure program, dubbed as “Build, Build, Build,” which will require P8.4 trillion in investments over the medium term. Part of this investment requirement is intended to be funded by the Comprehensive Tax Reform Program.

Until 2030, the Organization for Economic Cooperation and Development (OECD) – in its report, titled “Economic Outlook for Southeast Asia, China and India 2018” – said the Philippines needs to spend as much as P27 trillion to meet the domestic demand for infrastructure, particularly power, water and sanitation, transport and telecommunications.

The OECD, however, said the government might find it challenging to meet such spending requirement as its revenue collection has been less than 15 percent from 2011 to 2016.

The Paris-based organization said that for the government to accomplish its infrastructure plan, it needs to improve efficiency in spending and attract more investors in public-private partnership projects.

Senate assurance

Senate committee on ways and means chairman Sen. Sonny Angara said deliberations on the second package of the TRAIN will begin as soon as his panel passes the proposed tax amnesty bill.

“The committee can begin hearing the second package as soon as we finish the (tax) amnesty bill, which is a companion bill to the first package (of the TRAIN),” Angara said in a text message.

He said the committee, currently tackling three tax amnesty bills, aims to approve a consolidated version by the end of the month. Congress will resume session on Monday following a holiday recess.

Senate President Pro Tempore Ralph Recto, Sen. Paolo Benigno Aquino IV and Angara with Sen. Nancy Binay, filed separate bills seeking to grant general amnesty for unpaid taxes from 2015 and prior years.

Recto said the amnesty will give taxpayers with arrears an opportunity to come up with a clean slate and begin paying the correct taxes.

He said a “tax forgiveness program” would allow many people to surface and put their tax papers in order “without fear of prosecution.”

“These law-abiding citizens would have stepped forward a long time ago if not for complexity of the current tax system,” he said, specifically referring to “small businessmen and self-employed professionals” who find the bureaucratic requirements “too high, too often or too costly” to comply with.

Another thing dissuading hardworking individuals from voluntarily offering to settle past dues is their fear of being dealt with severely instead of with understanding.

“The provision for immunity from civil, criminal and administrative penalties to be granted to erring taxpayers will encourage those operating in the underground economy to legitimize their business operations,” Recto stressed in his bill’s explanatory note.

Meanwhile, the Trade Union Congress of the Philippines (TUCP) is pushing for the creation of a multi-sectoral price watch group to protect low-paid workers from unreasonable increase in the prices of goods and services, resulting from the new tax law. – Alexis Romero, Paolo Romero, Mayen Jaymalin