By Riza Lozada
The crucial Tax Reform for Acceleration and Inclusion Act (Train) bill was approved 17-1 by the Senate that sent it to the bicameral conference committee before finally submitted to President Duterte for signing.
The bill contained the first of the five package of tax reform sought to be put in place by the Duterte administration which is envisioned to bankroll the infrastructure buildup.
Senate ways and means committee chairman Juan Edgardo Angara said he will lead the upper chamber panel with Senate President Pro Tempore Ralph Recto with Senators Loren Legarda and Juan Miguel “Migz” Zubiri representing the majority bloc and Sen. Franklin Drilon representing the minority bloc in the bicameral conference to reconcile differences between the Senate and House versions of the bill.
The lone dissenter in the bill opposition Sen. Risa Hontiveros said she voted to reject the measure because it fell short of its promise to genuinely reform the tax system to a more equitable and beneficial to poor families and reshape consumer behaviour towards a more health-conscious populace.
“I am also disheartened by notions that the safety nets and mitigating measures in Train might be treated as mere suggestions by the Executive. It is unfortunate that the amendments that I and some of my fellow Senators sought to introduce to strengthen the safety net procedures didn’t seem to warrant collegial deliberations. The lowering of the value-added tax (VAT) rate was my bottomline. The non-expansion, worse, the lowering of earmarks meant for social protection programs was the deal breaker,” Hontiveros said.
Senators Antonio Trillanes IV and Bam Aquino were absent while Senators Panfilo Lacson and Francis “Kiko” Pangilinan did not vote.
Those who voted in favor of the bill were Senators Nancy Binay, Drilon, JV Ejercito, Francis Escudero, Win Gatchalian, Richard Gordon, Gregorio Honansan, Legarda, Manny Pacquiao, Grace Poe, Recto, Vicente Sotto III, Joel Villanueva, Cynthia Villar, Zubiri and Senate President Aquilino “Koko” Pimentel III.
The minority leader said deliberations in the bicameral conference level will prove to be the real battleground for its passage due to numerous disagreeing provisions between the Senate and lower house’ versions of the bill.
“The bicam will be difficult. The TRAIN is headed into a tough battle in the bicam,” Drilon said as he raised concerns about the effects of the tax reform package to the poor, particularly with the proposed additional taxes on petroleum products.
“With the reduced earmarking for social mitigating measures, it is not certain how the poor can cope with the increase in the price of fuel and with it, of other commodities,” he added.
Compared to the House’s version, the Senate bill introduced lower taxes for sugar-sweetened beverages except those that use high fructose corn syrup which shall be slapped with higher taxes.
Drilon also cited contentious provisions in the Senate and House versions of the TRAIN bill imposing higher tax rates on automobiles, sugar-sweetened beverages as well as conflicting provisions on value added tax (VAT) zero rating and lifting of VAT exemptions on senior citizens, among others.
Among the salient features of the bill include the increase in take-home pay of government and private workers as the exemption on the annual taxable income has been pegged at P250,000 plus the P82,000 tax exemption for 13th month pay and other bonuses or an approximate tax-free monthly income of P21,000.
An estimated 7.5 million individual income taxpayers will enjoy lower income tax rates.
Of the additional P130 billion revenues to be generated from it, 60 percent of the incremental revenues will go to infrastructure programs, 27 percent will be allocated to social protection programs including the unconditional cash transfer to the poorest 10 million Filipino families and health, nutrition and anti-hunger programs, while 13 percent will be allocated to military modernization programs.
Pimentel said the reforms on tax policy and tax administration are necessary to raise the funds that government would need for its long-term investments on infrastructure, education and healthcare services.
The Senate version approved excise taxes on petroleum products, including diesel at P1.75 per liter of volume capacity effective 2018, P3.75 in 2019 and P6.00 in 2010.
In addition, the Senate also adopted a 10 per cent excise tax on cosmetic procedures for aesthetic purposes.
Drilon said senators likewise approved “a 3,000 per cent increase in coal taxes” to be collected in three tranches until 2020, which means the currently imposed P10 excise tax will be raised to P100 in 2018, P200 in 2019 and P300 by 2010.
Finance Secretary Carlos Dominguez III said the government is now one big step closer to reforming the country’s tax system for the first time in over two decades–and providing a steady revenue stream to its ambitious infrastructure buildup–with the Senate’s approval of its Train version.
Dominguez expressed hopes that both chambers could wrap up bicameral deliberations on the first of the government’s five tax reform packages in time for the submission of the final version to President Duterte by December–so that a new law to this effect could be signed and implemented as scheduled by January 2018.
Dominguez said “the Senate’s timely approval of its TRAIN version moves the government one big step closer to overhauling the tax system for the first time in two decades with the primary benefit going to 99 percent of the country’s taxpayers who are to get higher take-home pay as a result of substantial cuts in their personal income tax rates or–better yet–outright exemption from income taxation.”
“We thank the Senate for its vote on its version of the tax reform bill. We hope that with the Senate’s swift action on the measure, the two chambers of the Congress can soon sit down in the bicameral conference committee to thresh out a reconciled version of the bill that would provide the most benefit for the majority of the Filipinos while raising additional revenues to support our infrastructure modernization program,” Dominguez said.
“We are hoping that a final congressional version of the TRAIN could be sent to the President’s desk by December, so the tax reform bill could then be signed into law and implemented as scheduled by January next year,” he said.
House Bill (HB) 5636, the Train version approved by the House of Representatives last May 31.
The Senate version provides additional revenue-generating measures that are not in the House version of Train. But both Senate and House versions provide for tax exemptions for those earning P250,000 and below.
Among the additional Train measures approved by the Senate on third and final reading are the doubling of the prevailing documentary stamp tax (DST) rates, except for property, which will remain as is, and loans, which will increase by 50 percent.
The DST increases include those on bank checks that will double from P1.50 to P3; on original issue of shares of stock, P1 to P2; and sales or transfer of shares of stock, P0.75 to P1.50.
Last May, President Duterte certified as an urgent and priority measure for congressional approval the TRAIN, which, he said, is crucial to the financial sustainability of the government’s ambitious agenda to sustain the country’s growth momentum and accelerate poverty reduction via a massive spending on infrastructure, human capital and social protection for the poor and vulnerable sectors.
In separate letters sent to Senate President Aquilino Pimentel III and Speaker Pantaleon Alvarez, the President said: “The benefits to be derived from this tax reform measure will sustainably finance the Government’s envisioned massive investments in infrastructure thereby encouraging economic activity and job creation, as well as fund the desired increase in the public budget for health, education and social programs to alleviate poverty.”
The DOF submitted to the House of Representatives its original TRAIN proposal in September last year, which was later modified and introduced in the chamber by Quirino Rep. Dakila Carlo Cua as HB 4774 and later consolidated with other tax reform-related measures as HB 5636.
This House version was finally approved by the House before the adjournment of the first regular session of the 17th Congress last May.
The Senate panel began the deliberations on the TRAIN, which was filed in the chamber by Senate President Aquilino Pimentel III as Senate Bill (SB) 1408, last March 22.
The Senate began conducting plenary debates on the revised measure, SB 1592, on Nov. 22 and finally approved it with substantial amendments last Nov. 28.
Dominguez earlier said that, “To sustainably finance these massive investments in infrastructure and in the people, tax policy reform will be crucial alongside tax administration and budget reforms.”
“The tax reform bill seeks to achieve a simpler, fairer, and more efficient tax system characterized by lower rates and a broader base, to encourage investment, job creation, and poverty reduction,” Dominguez said.
According to Dominguez, the TRAIN bill is “expected to help reduce poverty rate from 21.6 percent in 2015 to 14 percent in 2022, lifting some six million Filipinos out of poverty, and helping the country achieve upper middle-income country status where per capita gross national income increases from $3,500 in 2015 to at least $4,100 by 2022.”