Roadshows bare high support for tax reforms

Public support is high on the tax-reform proposals of the De­partment of Finance (DOF) pend­ing before Congress, as shown by the outcome of roadshows that trade groups held recently in a tie-up with the government.

The DOF has stressed that the government’s push for tax reform measures is a way to ad­dress inefficiencies, inequalities, and complexities in the tax sys­tem while also raising the funds needed to invest in the coun­try’s infrastructure and people.

the funds needed to invest in the coun­try’s infrastructure and people.

“We are redesigning our tax system to be simpler, fair­er, and more efficient for all,” the DOF said in its presentation at a recent national roadshow on the draft tax reform policy.

The revised Package 1 of the administration’s tax-reform program is contained in House Bill (HB) No. 4774, titled “Tax Re­form for Acceleration and Inclu­sion (Train)” and recently filed in Congress by Quirino Rep. Dakila E. Cua, chairman of the House ways and means committee.

In one of the roadshows held in Palawan, Benedicta Du-Bala­dad, president of Financial Exec­utives of the Philippines (Finex), said that among Train’s notable goals is to adjust income brack­ets and rates so that the poor pay less tax while the rich pay more.

Small businesses would also be assisted in meeting their obliga­tions through a unified taxation system that is designed for easier compliance and reduced costs. For income taxes, Train seeks to adopt a single in­come-tax exemption base of P250,000, regardless of civil sta­tus and number of dependents.

This would essentially do away with all exemptions such as personal and dependent’s exemption, tax-exempt bonuses and minimum- wage earnings. “Any citizen or resident (oth­er than self-employed and pro­fessional) whose income does not exceed P250,000 in a given year is automatically exempt from income tax without a need to show supporting evidence for exemption,” Du-Balabad said. Moreover, Train proposes widening the bracket for lower tax rates in order to accommo­date more low- and middle-in­come earners, and raising the tax rate for high-income individuals.

The bill also recommends widening the tax base by remov­ing special tax rates granted to employees of regional head­quarters of multinationals and offshore banking units who cur­rently enjoy a reduced tax rate. For small businesses, the planned tax system will impose a flat-rate tax of 8 percent on busi­nesses, including the self-em­ployed and professionals, whose annual sales do not ex­ceed P3 million, in lieu of income tax, VAT, or percentage tax. In short, there will be only one kind of tax to be filed and paid, said Du-Balabad.

Likewise, small businesses will be allowed to use a sim­plified form of bookkeeping. Other features of HB 4774 include higher consumption tax on high-end consumer goods, increased excise tax on fuel oil, and increased excise tax on au­tomobiles, with higher tax im­posed on high-value vehicles. 

It also eyes reducing the number of VAT exemptions-except for those on basic needs like health, education, and food-in order to reduce leakages in collections and make bookkeeping and tracking of input VAT credits simpler. At the same time, there will be unified taxation for all transfers of property, regardless of the mode of transfer, whether by sale, donation or by inheritance, based on fair market value.

This will not only remove tax arbitrage but it will also simplify tax compliance. “It will be a straightforward tax that is imputed whenever a property is transferred regardless of the mode of transfer, i.e. sale or barter, donation or by death,” said Du-Balabad. The national roadshow to raise public awareness of the proposed new Philippine tax policy package has been staged in Manila, Subic, Cebu, Cagayan de Oro, Davao, Palawan and Bohol. The Manila forum will be held on March 10. The fora were organized by the Philippine Chamber of Commerce and Industry, together with trade and professional groups such the Philippine Exporters Confederation, Inc., Tax Management Association of the Philippines, Finex, and Employers Confederation of the Philippines, and supported by Facilitating Public Investment program of the US Agency for International Development.

All these organizations have expressed support to the tax reform packages.