Battle on coal, sin taxes marks Train OK

By Luis Leoncio

Controversy hounded the Congress’ ratification of President Duterte’s revenue enhancement bill, the controversial Tax Reform for Acceleration and Inclusion (Train) as taxes on coal, mining, and tobacco were raised.

The bill is expected to be signed by President Duterte before Dec. 19.

Both chambers–the Senate and House of Representatives–voted to pass the bicameral conference committee report after reconciling differences of their respective versions.

Senators accused their House counterparts of trying to insert provisions to the final draft of the bill as a result of alleged lobbying from big business in the power industry.

The House contingent in the bicameral conference committee that deliberated on the bill allegedly made changes in the bicameral report that was supposed to have been submitted for approval last Tuesday by deleting a provision that imposes excise tax on locally-produced coal.

Senators were surprised of the alleged deletion in the final version of the bill and confronted House members over it.

The senators insisted on the repeal of the excise tax exemptions being enjoyed by local coal industry for the past 42 years.

The P10 coal excise tax rate has remained unchanged since 1988 while the local industry has been exempted from paying excise since 1976.

In the final version, the current P10 excise tax per metric ton of coal will be increased to P50 per metric ton in the first year of implementation, P100 in the second year and P150 in the third and succeeding years.

The original rates, which was met with much contention, sought a 3,000-percent increase in coal taxes of P100 in 2018, P200 in 2019 and P300 by 2020.

An apparent compromise was reached that led to the ratification of the bill.

“There is always a middle ground,” Senate President Pro Tempore Ralph Recto said, adding that he made the recommendation to set aside the differences of both chambers saying that it was agreed that value added tax (VAT) exemption will be pursued for the power industry in the succeeding tax reform packages.

Currently, coal that is consumed domestically is 60 percent imported and 40-percent locally-produced.

Some senators also expressed disappointment with the inclusion of increase in excise tax of sin products, specifically the cigarettes as this was supposed to take place in the second tax reform package.

The ratified TRAIN seeks to raise the take-home pay of more than 7 million workers in the country.

While both versions exempt P250,000 annual taxable income, members of the bicameral committee have agreed to adopt the provision of the Lower House that provides for a second tranche of the personal income tax reform that would further reduce income tax rates starting 2023.

Bicameral conferees have also agreed to raise the tax exemption cap of 13th month pay and other bonuses to P90,000.

For example, a call center representative earning about P30,168 a month is currently taxed at 30 percent or P55,490 annually.

With such reduction in tax rates, his or her annual tax due will be reduced to P18,660 at 20 percent, resulting to approximately P36,830 annual savings.

In 2023, the annual taxes will be further slashed to P13,995 or a 15 percent income tax rate.

Moreover, the TRAIN bill provided for a simpler and easier tax filing and payment for self-employed individuals and professionals (SEPs) to encourage them to pay correct taxes.

Members of the bicam have agreed to make the eight percent flat tax optional for those earning below P3 million in place of the regular rates.

Self-employed and professionals earning below P250,000 will likewise be exempt from income tax, while those with gross sales or receipts of P500,000 and below will be exempt from the three percent tax.

The flat tax will only be filed once a year, while VAT and percentage tax shall be filed quarterly.

Income tax returns will also be shortened and simplified to four pages from the current 12 pages.

For fuel petroleum products, new taxes will be imposed on liquefied petroleum gas (LPG) that will have a grouted increase or P1 in 2018; P2 in 2019 and P3 in 2020.

For diesel fuel, a P2.50 tax would be imposed starting 2018, P4.50 in 2019, and P6 in 2020.

Tax on regular and unleaded premium gasoline would be raised to P7 in 2018, P9 in 2019 and P10 in 2020.

Sugar-sweetened beverages will be taxed P6 per liter for beverages using caloric and non-caloric sweeteners and P12 per liter for beverages using high fructose corn syrup.

Automobile taxes were also raised. For those valued P600,000 and below a four percent tax is imposed; a 10 percent tax is slapped on cars worth P600,000 up to P1.1 million; 20 percent on P1.1 million to P2.1 million and 50 percent on cars worth over P2.1 million.

Meanwhile, a budget watchdog protested the low tax increase on tobacco products under the ratified bill

A very low P2.50 tobacco tax increase per year on the average, resulting to a unitary tax of P32.50 for 2018 that was included in the Train bicameral conference committee report, is a shameful act, Social Watch Philippines said in a statement.

“This action will not be able to sustain the government’s universal health care for all program,” it added.

The P69.4 billion sin tax incremental revenue for 2016 was earmarked for universal health care program specifically for PhilHealth premiums for the poor, health policy, regulations and administration of personnel benefits, health facilities enhancement program including capital outlay; support to hospital operations, and medical assistance to the poor and medicines to local health structures.

It also supported programs such as the doctors to the barrios, health awareness, quick response funds, and attainment of the Sustainable Development Goals (SDGs).

On the other hand, the expected incremental revenues from the P2.50 tobacco tax increase amounting to P5 billion is way below the targeted budgetary needs to implement the expanded universal health care for all program, including systems reform and primary care for all.

According to the Department of Health (DOH), on top of its current programs, the government needs an additional P70B to finance and provide essential health package for all Filipinos in 2018.

SWP said the country spends P210 billion in health outlays for four diseases attributed to tobacco smoking alone: lung cancer, Chronic Obstructive Pulmonary Disease (COPD), Coronary Artery Disease (COD) and Cerebro-Vascular Disease (CVD).

Worse, it is a deceitful move because it was a last minute insertion during the bicameral conference of the Train Package 1 when it was previously denied several times during the Senate plenary deliberations despite citizens’ clamor.

The Senate never bothered to deliberate and approve the bills filed by Sen. Manny Pacquiao and Sen. JV Ejercito proposing a unitary increase of tobacco tax to P60, with expected revenue of P50 billion and P60 billion and P90, with P80 billion to P90 billion in additional revenues, respectively.

Legislators who proposed and government officials who supported the P2.50 increase in tobacco tax are deliberately undermining the government’s health program and should be tagged as health saboteurs putting at risk the health of the population and the entire nation.