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Risks flagged with delay of tax reform package
Source: http://www.bworldonline.com/content.php?section=TopStory&title=risks-flagged-with-delay-of-tax-reform-package&id=144685
Source Date: Thursday, May 04, 2017
Focus: Electronic and Mobile Government, Knowledge Management in Government, Citizen Engagement, Internet Governance
Country: Philippines
Created: May 03, 2017

ANZ Research economist Eugenia Fabon Victorino said stalling the approval of the first tranche of tax adjustments would leave the Duterte administration’s pipeline of infrastructure projects unfunded, and would also keep agencies from preparing to adopt new tax collection methods.

The Department of Finance (DoF) has already submitted the first package of its proposed tax reform plan to the House of Representatives, which involves adjusting the income tax brackets for individual earners. The revenue hole will be plugged by the removal of some exemptions to value-added tax (VAT), coupled with higher duties on cars and fuel, as captured by House Bill (HB) 4774.

However, the measure remains under committee deliberations as of this writing, just weeks away from the July implementation eyed by Finance Secretary Carlos G. Dominguez III.

The measure needs to hurdle three readings from the House and another round in Senate. The House and Senate versions must be harmonized by the two chambers before a final version can be sent to Malacañang for signing into law.

House Majority Leader Rodolfo C. Fariñas said the tax reform plan is not included in the list of 14 measures which the two chambers committed to pass within the month, following a joint meeting held on Tuesday just as legislative sessions resumed.

Quirino Rep. Dakila Carlo E. Cua, who heads the House committee, said he looks to pass the tax reform plan before June 2, right before the first regular session closes.

Ms. Victorino flagged these prolonged deliberations render the July target unattainable, which could hinder the government’s spending plans over the coming years.

“Overall, the administration’s July deadline may be too tight for government agencies to effectively implement the reforms,” the ANZ analyst said in a special report sent to reporters yesterday

“The introduction of new infrastructure projects depends on the ability of the government to sustainably raise its tax collections.”

Economic managers recently staged the “DuterteNomics” forum, where they committed to spend P8.4 trillion on infrastructure projects until 2022 to plug connectivity gaps and sustain the growth momentum.

Some P139.6 billion in foregone revenues are expected from lower personal income tax, estate tax and donor tax rates, to be offset by an additional P302.2 billion from reduced VAT exemptions and P162.5 billion from higher excise duties on cars and oil products.

However, the House Committee on Ways and Means may decide to tweak the DoF’s proposed rates during deliberation, although it has agreed “in principle” that the bill will be passed as a package rather than piecemeal.

ANZ also stressed the importance of administrative reforms captured under the proposal such as the easing of the bank secrecy law, saying that this would “complement” efforts to raise the government’s tax haul.

Technical upgrades needed to equip state regulators in monitoring petroleum prices and cargo shipments would likewise be held off pending the signing into law of the tax reform plan, which could abet revenue leakages if the agencies are not “adequately prepared,” she added.

ANZ’s Ms. Victorino also said that the impact of a separate tax amnesty proposal is unlikely to capture additional taxes from undeclared wealth, with its implementation largely dependent on the lifting of secrecy rules on bank deposits.

“The Philippines’ proposal will focus on delinquent estate taxes and will not likely lead to capital inflows from offshore wealth, ” the report read.

HB 4814 seeks to grant qualified persons immunity from civil, criminal or administrative penalties to invite them to settle past tax dues.
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