Senate panel cuts sugary drinks tax, adjusts fuel excise tax schedule

The Senate committee on ways and means made major changes to  its version of the comprehensive tax reform program compared with the House-approved measure.
 
The committee, chaired by Senator Juan Edgardo Angara, filed the Senate Bill No. 1592 on Wednesday—its version of the Tax Reform for Acceleration And Inclusion Act (TRAIN)—introducing adjustments to House Bill 5636, the lower chamber's version.

The Senate version lowered excise tax on sugar sweetened beverages proposed by the Department of Finance and carried by HB 5636.

"The Senate proposes a two-phased approach from the P10- and P20-peso structure proposed by HB 5636. First, there will be a tax worth P5 per liter for beverages with caloric sweeteners, P3 for those with non-caloric sweeteners, and P10 for those that use High Fructose Corn Syrup (HFCS)," Angara said in his sponsorship speech.

"This shall be in place for the first two years of the implementation of the tax reform package to allow the Food and Drug Administration (FDA) to build its capacity to administer a tax based on the actual sugar content of the drink," the senator noted.

By the third year of implementation, the tax on sugary drinks will be P0.05 per gram of sugar per beverage—a tax regime that hopefully incentivizes manufacturers to produce and consumers to drink less sugary drinks, he said.

SB 1592 excluded plain milk, infant formula milk, and growing up milk, as well as powdered, ready to drink, flavored and fermented milk products with less than 5 grams of sugar per 100ml from the tax measure their its nutritional value.

Also excluded is 3-in-1 coffee as one of the most consumed food items of ordinary Filipinos.

"Nakinig naman tayo sa hinaing ng marami. Kaya pinili namin gawing exempt ang 3-in-1, dahil 90 percent ng mga bumibili nito ay mula sa class D at E," Angara said.

Other excluded beverages are natural fruit and vegetable juices, unsweetened tea, meal replacement and medically indicated beverages. Sweetened beverages that use coco sugar and stevia are also excluded.

Fuel excise tax

The Senate panel's version of TRAIN adjusted the schedule of P6 per liter increase in the excise tax of petroleum products.

"Sa usapin ng produktong pampetrolyo, panukala ng Senado ay isang 1.75-2.00-2.25 na schedule ng pagtaas ng excise tax, mula 2018 hanggang 2020," Angara said

The DOF proposal was a straight out P6 increase, while HB 5636 provided for a phased implementation of 3-2-1.

Kerosene will remain exempt from the excise tax as the Senate panel took in consideration its wide use by an estimated three million households in far-flung areas for lighting and cooking.

The Senate version reduced the rate for liquefied petroleum gas to P3, and will be implemented at the rate of 1-1-1 as it is commonly used by Filipino households for cooking.

"The Senate version also incorporates a safety mechanism against the possible negative effects of the petroleum excise tax increases. If between 2018 and 2020 the price of oil exceeds $80 a barrel or the inflation rates rises beyond the country’s targets, then the petroleum excise tax increases will be stopped," Angara said.

Tax exempt threshold

From the originally proposed P250,000 annual personal income tax exemption, SB 1592 lowered the threshold to P150,000.

"Tinataas ng Senado sa P150,000 annual income ang exempted sa income tax," Angara said, noting that it will rise to P250,000 if a taxpayer has four qualified dependents.

The Senate version increased the value-added tax (VAT) threshold from P1.9 million to P3 million—exempting small businesses with total annual sales of P3 million and below from paying the VAT.

The bill retained the VAT exemption of raw food agricultural products, health and education, senior citizens, persons with disability, business process outsourcing, cooperatives, renewable energy, Red Cross, Boy Scouts, and Girl Scouts.

SB 1592 likewise retained the VAT exemption of socialized housing so as not to exacerbate the country's six-million housing backlog.

Meanwhile, the VAT exemption of government-owned and controlled corporations (GOCCs), state universities and colleges (SUCs), and national government agencies will be shifted to a form of subsidy through the tax expenditure fund (TEF) under the national budget.

The HB 5636 provides for a general repeal of all special laws granting VAT exemption.

Automobile excise tax

While the Senate version introduced several changes in some provisions of HB 5636, it adopted the House's version on the proposed excise tax on automobiles.

"When it comes to the auto excise tax, the Senate by and large adopts the five-tiers proposed by the House," Angara said.

The Senate bill exempted hybrid and electric cars to encourage greener and cleaner transportation options.

The SB 1592 reduced and simplified the estate tax to a flat tax rate of 6 percent based on the net value of the estate.

It also reduced and simplified donor’s tax to a flat tax rate of 6 percent on net donations for gifts exceeding P100,000, regardless of relationship between donor and donee.

"Para makatulong, nagsama tayo ng ibang buwis na wala sa mga naunang panukala, pero kasama sa mga Tax Reform Packages ng DOF. Kasama dito ang pagtaas sa buwis sa interest ng Foreign Currency Deposits, sa Capital Gains Tax sa stocks na hindi kinakalakal sa stock exchange, sa tax on Dividend Income, at pagpataw ng tax sa mga Cosmetic Procedures," Angara said.

The Senate version increased the final tax on foreign currency deposit units from 7.5 percent to 20 percent; capital gains tax for stocks not traded in stock exchange from 5 percent or 10 percent to 20 percent; tax on dividend income from 10 percent to 20 percent.

It increased the coal excise tax from P10 to P20 per metric ton.

Cosmetic procedures and body enhancements for aesthetic reasons in the list of non-essential goods and services will be levied a 20-percent excise tax.
Reconstruction of facial and body defects due to birth disorders, trauma, burns, disease, and those intended to correct dysfunctional areas of the body will be exempt. — VDS, GMA News