DOF moves to lower personal income tax, expand VAT base

The Department of Finance on Monday submitted to Congress the Duterte administration's proposals to reduce the personal income tax (PIT) and expand the value-added tax (VAT) base as part of a comprehensive tax reform package.

In an emailed statement, the department said it submitted to the House of Representatives Committee on Ways and Means, chaired by Rep. Dakila Carlo Chua, on Monday morning the first of four sets of proposals to bring about change and improve the tax system.

"The PIT reforms include adjustments in the income tax brackets to correct so-called income creeping; reduce the personal income tax maximum rate over time to 25 percent from 32 percent at present, except for highest income earners; and shift to a simpler, modified gross system," it said.

Finance Secretary Carlos G. Dominguez III said earlier the government was looking at plans to raise the personal income tax rates of the ultra-rich – those earning P5 million and above annually – to 35 percent from the 32 percent.

While the Employers' Confederation of the Philippines (ECOP) supports such a move, the Management Association of the Philippines (MAP) said it could lead to lower revenues.

Part of the tax reform package is a proposal to adjust the excise taxes on petroleum products.

The DOF earlier said it plans to raise the excise tax on gasoline to P10.00 per liter from P4.35 per liter, and diesel – which is currently at zero– to P6.00 per liter.

The DOF proposal covers the restructuring of the excise tax on automobiles except for buses, trucks, cargo vans, jeeps, jeepney substitutes and special purpose vehicles.

According to the DOF, the net gain from the proposed tax reforms will be allotted to the conditional cash transfers, lifeline electricity subsidies, direct discounts, and higher Philippine Health Insurance Corp. (PhilHealth) coverage for those affected by new fuel prices with the excise tax adjustments.

The additional revenue will also be used to boost spending under the administration of President Rodrigo R. Duterte.

"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 of reducing poverty from 26 percent to 17 percent in six years and elevating the Philippines to the status of a high-income country in one generation," Dominguez said.

Duterte's economic team bared in June the 10-point economy agenda of the administration, which centers on continuing and maintaining macroeconomic policies of the administration of former President Benigno S.C Aquino III, as well as the adoption of a progressive tax reform program. — Jon Viktor Cabuenas/VDS, GMA News