More Tax Reform Laws On The Way
The Tax Reform for Acceleration and Inclusion (TRAIN) signed by President Rodrigo Duterte last December was just the first of the five tax packages under the administration’s comprehensive tax reform plan.
The second phase of TRAIN is currently pending in Congress. Package 1B of the TRAIN include estate tax amnesty, general tax amnesty, adjustment in the motor vehicle users charge, and amendments to the bank secrecy law.
In their media briefing held on January 8, 2018, Finance Secretary Sonny Dominguez said that package 1B will add some ₱38.9 billion to the ₱89.8 billion revenues expected to be generated by the TRAIN law.
Package 1B is crucial in keeping the 3% GDP deficit target, Dominguez added.
In order to accomplish this feat, the government needs to pass the rest of the tax reform packages (2 to 5). If the succeeding packages aren’t approved, it either means a breach of this deficit which will hurt the economy or possible a cut in government spending, which will compromise the infrastructure program of the government (BUILD BUILD BUILD).
If the GDP deficit target isn’t met, the government will need to borrow money to achieve its goals, which isn’t always ideal, said Dominguez. The end goal of the tax reform program is to raise at least 25% of the roughly ₱2 trillion of the administration’s infrastructure program valued at ₱8 billion.
Compared to the most recent tax reform package, the upcoming ones are “revenue neutral,” which mean they won’t necessarily increase the taxes. Dominguez added that the upcoming tax packages are not so much on increasing taxes, but it’s just making it fair.
Package 2 of the TRAIN is one of those “revenue neutral” measures and is slated for submission to Congress this month. It will lower corporate income taxes and modernize fiscal incentives. Meanwhile, 3 and 4 are expected to reach Congress this year.
Package 4 is another “revenue neutral” measure aimed at adjusting passive income and financial taxes. Package 5, however, is still being scrutinized by the government on its necessity, since some of its provisions were already incorporated in the recently enacted TRAIN law.