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Philippines: P10 billion monthly losses seen from income tax cut – DOF
MANILA, Philippines — The newly enacted tax reform law is expected to slash the government’s income tax collections by P10 billion a month, the Department of Finance (DOF) said yesterday.
In a statement, Finance Secretary Carlos Dominguez III said the government is estimated to lose P10 billion in tax collections monthly due to the reduction in personal income tax rates under the Tax Reform for Acceleration and Inclusion (TRAIN) Act.
He said this would translate to higher takehome pay for Filipino taxpayers, therefore improving their purchasing power which would ultimately stimulate the economy.
“Our estimate is P10 billion a month in the reduction in collections from the withholding tax. So that means to say people are going to have P10 billion a month more to spend,” Dominguez said.
Republic Act 10963 or the TRAIN Law, which contains the first package of the government’s Comprehensive Tax Reform Program (CTRP), exempts those earning an annual taxable income of P250,000 and below from paying personal income tax.
The 13th month pay and other bonuses not exceeding a total of P90,000 are also tax exempt under TRAIN.
According to the DOF, over six million Filipino taxpayers are seen to benefit from this tax exemption.
The law also prescribes the personal income tax rates for other taxpayers belonging to other tax brackets, such as those earning above P250,000, as well as the “ultra-rich” or those earning P8 million and above.
To offset the loss from personal income tax collections, the tax reform law also contains revenue-enhancing measures which the DOF said would support the government’s massive infrastructure and human capital development programs.
These include the removal of value-added tax (VAT) exemptions to various sectors; excise tax adjustments on fuel, automobiles, tobacco, coal, and minerals, among others; and the imposition of taxes on sugar-sweetened beverages and non-essential cosmetic procedures.
Finance Undersecretary Antonette Tionko, who heads the Revenue Operations Group of the DOF, said the BIR has yet to compute the net gain of the government from the implementation of TRAIN as the agency has yet to come up with the complete data on income tax collections.
According to DOF estimates, the TRAIN law is expected to give the government P89.9 billion in additional revenues in the first year of its implementation.
The agency said up to 30 percent of the incremental revenues from the law is earmarked for social mitigation measures, while 70 percent would help support the government’s Build Build Build infrastructure program.
Aside from this tax measure, the DOF is also pushing for the legislation of more tax packages, such as Package 2 of the CTRP, which was filed in Congress yesterday.
The package seeks to reduce the corporate income tax rates in the country, while rationalizing the fiscal incentives system to make it more targeted, time-bound, transparent and performance-based.
Source: https://www.philstar.com/business/2018/03/23/1799376/p10-billion-monthly-losses-seen-income-tax-cut-dof#QhYdy5Yv50hGubYh.99