Gov’t to limit VAT relief, increase excise tax on oil

The Department of Finance (DOF) plans to lift several value-added tax (VAT) exemptions and adjust to inflation the excise tax on oil products to offset the revenue loss from lowering income tax rates.

During the budget briefing of the Development Budget Coordinating Committee (DBCC) before the House Committee on Appropriations, Finance Secretary Carlos Dominguez III pegged the annual revenue loss from lower personal and corporate income tax rates at P173.8 billion.

“The lowering of income tax rates will bring down revenues by approximately P139 billion and the lowering of corporate income tax rates will bring down our revenues by approximately P34.8 billion,” Dominguez said.

The Duterte administration has backed proposals to lower individual tax rates from 32 percent to 25 percent, and the corporate tax from 30 percent to 25 percent.

Asked whether slashing the income tax rates would result in additional tax burden, Dominguez said the government would limit VAT exemptions on food, medicine, and education.

They are also planning to “eliminate the zero-rated VAT transactions.”

The excise tax on oil products will be adjusted to inflation, which could, for instance, hike the tax on fuel to P10 per liter, Dominguez said.

“We are contemplating on making that proposal. At the moment the excise tax, for example on fuel, is P4.35 per liter and this was set in 1997. If we were to adjust it to inflation, the amount should be roughly an increase of P5.65 per liter or a total of P10,” he said.

The government will propose to tax sugary and fatty foods, also to encourage consumers to buy healthy products.

Albay Rep. Edcel Lagman said the tax reforms proposed by the DOF should be reviewed carefully by Congress.

“I’m afraid that, Mr. Secretary ... whatever benefits the decrease in personal income tax rate can be eroded by new VAT or additional taxes consequent to the expansion of the VAT base,” Lagman said.

Dominguez defended the government’s position, saying “the new tax package is really designed to increase our revenues.”

He said revenues would fund investment “to improve the economies in the various regions of the country.”

The government is proposing a P3.35-trillion budget for 2017. — VDS, GMA news