What to expect from tax reforms under HB 5636

The House of Representatives on Wednesday approved on third and final reading House Bill 5636 or the Tax Reform for Acceleration and Inclusion (TRAIN), backed by economic managers of the Duterte administration.

Under HB 5636, the government plans to lower the personal income tax and expand the value-added tax (VAT) base.

The bill was approved on second and third reading on Wednesday, with law makers voting 246-9-1.

The Department of Finance (DOF) on Thursday thanked the House for approving the measure containing the first package of the Duterte administration's tax reform agenda.
 
It also "expressed optimism that, with President Duterte declaring it as an urgent measure crucial to his administration's massive expenditure program, the Senate would similarly  pass the measure soon enough when the 17th Congress reopens for its Second Regular Session in July."
 
HB 5636 is a substitute bill consolidating 54 other tax-related measures and the original proposal authored by Quirino Rep. Dakila Carlo Cua.

Finance Undersecretary Karl Kendrick Chua said the DOF will present its case before the Senate in July with the hope that senators would retain TRAIN in its original form.
 
The 17th Congress will resume on July 24, and President Duterte is scheduled to deliver his second State of the Nation Address (SONA).
 
Chua said the first package of the CTRP is key to an economy that is truly inclusive and helps the poorest Filipinos rescue themselves from the poverty trap.
 
He cited the following reasons why the country is in “dire need” of tax reforms:

• Personal and corporate income tax rates are much higher than the rest of the region, eroding the income of the people and making the country uncompetitive

• The VAT system is awash with more than 140 lines of exemptions, leading to massive leakages estimated at more than P500 billion, which cannot be solved by improving tax administration alone, as the core problem lies in these exemptions that give rise to discretion, and thus corruption and tax evasion

• Excise taxes on oil products have not been adjusted to inflation for 20 years now, causing P145 billion in foregone revenues annually

• Automobile excise taxes have not been adjusted for 13 years, making those who can afford to pay contribute much less to the tax system

• Laws on bank secrecy prevent the Bureau of Internal Revenue from conducting proper audits and ironically encourage tax evasion

Chua said the HB 5636 aims to correct these regressive features of the tax system. — With Jannielyn Bigtas/Ted Cordero/Jon Viktor Cabuenas/VDS, GMA News