In a statement, the department said that Package 2 of the Comprehensive Tax Reform Program (CTRP) was filed with the Office of the House Speaker on January 15, the first working day for the year for Congress following a yearend recess.
Finance Secretary Carlos Dominguez 3rd last week committed to submit the proposal before session resumed. By law, all revenue measures should first be approved by the House.
Package 2, which the DoF has said would be revenue-neutral, proposes to gradually lower the corporate income tax (CIT) rate to 25 percent from 30 percent while also modernizing incentives to make these “performance-based, targeted, time-bound, and transparent,” Finance Undersecretary Karl Kendrick Chua said.
He said that approval of the tax reforms would ensure that perks granted to businesses generate jobs, stimulate countryside development and promote research and development.
Sunset provisions will also ensure that the incentives do not last forever and are reported so the government can determine the magnitude of their costs and benefits.
Chua has claimed that incentives with no time limits were costing the government over P300 billion annually in foregone revenues.
The Finance official has also pointed out that compared to other Southeast Asian economies, the Philippines imposes the highest CIT rate but is at the bottom in terms of collection efficiency.
The Philippines’ collection efficiency rate of only 12.3 percent is much lower, for example, than Thailand’s 30.5 percent and its corporate tax of just 20 percent.
Package 2 is separate from the still-to-be approved Tax Reform for Acceleration and Inclusion (Train) 1B, which the Finance department wants Congress to pass within the first quarter of this year.
Train 1A, or Republic Act 10963, was passed by Congress in December and took effect at the start of the year. The law lowered personal income taxes but raised excise and other taxes on items such as fuel and cars, with revenues expected to be used for the Duterte administration’s ambitious “Build Build Build” program.
Officials have said that estimated revenues, while substantial, will not be enough thus the need for Train 1B, which includes complementary measures such as motor vehicle users’ charges.
The Finance department has said that potential revenues from Train 1A and 1B could hit P969.2 billion by the end of 2022.
Train 1A will account for the bulk or P786.4 billion.
“In Package 1, Congress passed two-thirds of the needed revenue for 2018 and it is expected to pass the balance early in 2018 to help us achieve our revenue and deficit targets,” Dominguez said last week.