The Department of Finance (DOF) has submitted to Congress the first package of tax reforms designed to lower personal income-tax rates, while raising revenues to help fund the Duterte administration’s 10-point socio-economic agenda for inclusive growth.
The first of four sets of tax reforms was submitted to the House Committee on Ways and Means chaired by Rep. Dakila Carlo E. Cua on Monday. The proposal includes measures on the restructuring of the personal income-tax (PIT) system, expansion of the value-added tax (VAT) base by reducing the coverage of its exemptions, adjustment of excise taxes imposed on petroleum products, and restructuring the excise tax on automobiles, except for buses, trucks, cargo vans, jeeps, jeepney substitutes and special- purpose vehicles.
The PIT reforms include adjustments in the income-tax brackets to correct so-called income creeping, reduce the personal income-tax maximum rate to 25 percent, from 32 percent—except for highest income earners—and shifting to a simpler, modified gross system.
A quarter to a third of the net gain from the proposed tax reforms would be allocated for the government’s conditional cash-transfer program, lifeline electricity subsidies, direct discounts and higher Philippine Health Insurance Corp. coverage, among other targeted subsidies for the sectors to be affected by the new fuel prices arising from the adjustments in the excise tax on petroleum products.
Finance Secretary Carlos G. Dominguez III said that tax reform is crucial to the task of reconfiguring the Philippine economy to attain the Duterte administration’s goal of inclusive growth.
“Without reforming our tax system so that it becomes fairer, simpler and more efficient, government cannot undertake the volume of spending required in achieving our goals,” he said.
A comprehensive tax reform package that includes other measures will also augment the P1 trillion in investments needed to transform the country into a high-income economy in one generation or by 2040.