MANILA— The comprehensive tax reform package of the Duterte administration on Tuesday reached the plenary at the House of Representatives for deliberations.
House Bill 5636, also known as the Tax Reform for Acceleration and Inclusion (TRAIN), seeks to lower personal income tax (PIT) rates while broadening the tax base through reforms in consumption taxes such as the Value Added Tax (VAT) and the excise taxes on automobiles and fuel.
House ways and means committee chair Dakila Cua sponsored the measure to the floor for second reading after four months since it was introduced at the House of Representatives.
In his sponsorship speech, Cua said the measure seeks to lower personal income tax rates while raising government revenues for increased spending in social welfare, infrastructure, education, and health care.
Cua pointed out that delaying the much needed tax reforms would also stall the economic growth of the country.
HB 5636 aims to enhance the progressivity of the tax structure through rationalization of the internal revenue system.
Under the bill, workers earning no more than PHP250,000 annually will be exempted from paying personal income taxes.
To compensate for the revenue losses from the lowering of the PIT rates, some of the offsetting measures include increasing excise tax rates on all petroleum products and automobiles; expanding the value added tax (VAT) base by limiting exemptions to raw food and other necessities; introducing excise tax on sugar-sweetened beverages; and improving tax administration measures.
The revenues shall also be allocated for infrastructure, health, education and social protection expenditures.
The bill seeks to impose the following excise tax rates on diesel fuel oil, liquefied petroleum gas, and bunker fuel oil: PHP3 per liter in 2018; PHP5 in 2019, and PHP6 in 2020.
The bill would also increase the existing excise taxes on lubricating oils and greases, waxes, denatured alcohol for motive power, leaded premium gasoline, unleaded premium gasoline, and aviation turbo jet fuel to PHP7 per liter in 2018, PHP9 in 2019, and PHP10 in 2020.
As for the excise tax on automobiles, the measure proposes a staggered implementation of increased levies in two schedules in 2018 and 2019.
The excise tax for cars will be raised to 3 percent by 2018 and further increased to 4 percent by 2019 if the net manufacturer’s price/importer’s selling price is up to PHP600,000 for the lower bracket.
For the higher bracket with a price of over PHP3.1 million, the tax rate by 2018 will be PHP1.468 million plus 90 percent of the value in excess of PHP3.1 million. For 2019, if the price is over PHP3.1 million, the tax rate will be PHP1.824 million plus 120 percent of the value in excess of PHP3.1 million.
Meanwhile, sugar-sweetened beverages shall be slapped with PHP10-per liter excise tax by 2018.
Furthermore, the bill seeks to remove the VAT exemption on sales by agricultural cooperatives, gross receipts from lending activities by credit or multi-purpose cooperatives, sales by non-agricultural, non-electric and non-credit cooperatives.
The bill will also lift the VAT exemption on housing, including real property utilized for low cost and socialized housing; and lease of residential units with monthly rental not exceeding PHP10,000, among others.
According to Majority Floor Leader Rodolfo Fariñas, the bill will most likely be approved on second reading by Wednesday next week.
Fariñas added the tax reform bill will be approved on third and final reading before the sine die adjournment on May 31 so that it can be transmitted to the Senate.
All tax measures must emanate from the House of Representatives.