House OKs tax reform package on final reading

The House of Representatives passed on third and final reading President Rodrigo Duterte’s comprehensive tax reform package

Certified as an “urgent measure” by the President, the administration’s tax reform package which seeks to lower personal income taxes while imposing additional taxes to offset the revenue losses to the government has been approved by the House of Representatives on third and final reading.

Voting 246- 9 with one abstention, lawmakers approved House Bill (HB) No. 5636 or the Tax Reform for Acceleration and Inclusion (TRAIN), principally authored by Rep. Dakila Cua (PDP-Laban, Quirino), chair of the committee on ways and means.

Under the bill, workers earning P250,000 and below for the years 2018 and 2019 will be exempt from paying personal income taxes. Tax on self-employed and or professionals enjoying gross sales or gross receipts shall pay eight percent income tax in excess of P250,000 gross income. From the present P82,000, the measure now increased the tax exemption for 13th month pay to P100,000, including other cash benefits. The measure also lowers the rates of estate and donor’s taxes by imposing unitary tax rate of 6 percent.
However, measure which aims to lower personal income taxes, has been criticized because of provisions increasing taxes on petroleum and other products such as brand new vehicles and lottery winnings.

To compensate for the revenue losses from the lowering of the personal income rates, some of the offsetting measures include increasing excise tax rates on all petroleum products and automobiles; expanding the value added tax (VAT) base; 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: P3 per liter in 2018; P5 in 2019, and P6 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 P7 per liter in 2018, P9 in 2019, and P10 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 P600,000 for the lower bracket.
For the higher bracket with a price of over P3.1 million, the tax rate by 2018 will be P1.468 million plus 90 percent of the value in excess of P3.1 million. For 2019, if the price is over P3.1 million, the tax rate will be P1.824 million plus 120 percent of the value in excess of P3.1 million.

Meanwhile, sugar-sweetened beverages shall be slapped with P10-per liter excise tax by 2018.

The bill will also lift the VAT exemption on lease of residential units with monthly rental not exceeding P10,000.

Furthermore, a 20 percent tax on final cash winnings from lotto and sweepstakes lottery conducted by the Philippine Charity Sweepstakes Office (PCSO) will also be imposed under the measure.

Meanwhile, in the Senate, ways and means committee chair Sen. Juan Edgardo ‘Sonny” Angara said the panel is having a hard time passing the tax reform package being pushed by the Duterte administration due to concerns raised on the measure’s impact on ordinary Filipinos.  

Angara also clarified that what was certified as priority bill by the President was the House bill since all money measures should come from the House before the Senate could act on it.