By InterAksyon | September 26, 2017, 6:47 PM


MANILA – The version of the tax reform package reported out by the Senate ways and means committee is a derailed TRAIN, according to civil society advocates led by Action for Economic Reforms, which urged senators to amend it in plenary deliberations.

AER said the senators should focus on keeping the original proposals of the Department of Finance (DOF) like the higher income tax relief for the working classes; a higher marginal tax rate for the richest one percent; fuel and auto taxes and the removal of VAT exemptions that will generate significant revenue not only to finance education, health and public transportation but also to ensure the funds for the cash transfers for the poor and near poor.

AER said Sen. Juan Edgardo Angara, committee chairman, had sought to present his proposals as pro-poor with the “negligible” increase in fuel excise tax in the first year. The group said the lower fuel tax will mean less revenue, thus restricting spending for the poor, and will only benefit the richest 10 percent who consume more than half of total fuel production.

“The reduced rates on fuel tax will mean a slide in targeted revenues from P70 billion to P40 billion. The Angara bill will limit the unconditional cash transfer to 10 million households only, excluding around 2 million poor households in the 5th income decile, who should be also receiving the transfer,” said Jo-Ann Diosana, an AER economist.

Angara’s Senate Bill 1592 also lowered the non-taxable income to only P150,000 from the DOF’s initial proposal of P250,000 per year. On the order hand, the marginal tax rate for the richest individuals is cut from the proposed 35 percent rate to 32 percent.

“His income tax proposal will translate into a higher burden for low-income earners in the informal sector, like vendors and service workers. This clearly shows the bias of the bill towards the richest Filipino taxpayers while the low-wage workers and marginal income earners are denied the relief,” Diosana added.

Jenina Joy Chavez, an executive officer of AER, also expressed alarm over the retention of many VAT exemptions and extension of zero-rating to some private interests.

“The generous VAT exemptions can predict what will happen to the rationalization of fiscal incentives—it will likely be watered down, given Angara’s accommodation with respect to VAT exemptions. It shows the bias of senators like Angara to protect vested interests,” said Chavez.

The Angara bill maintains the VAT exemptions of the business process outsourcing sector, cooperatives, power transmission, renewable energy, housing, residential leasing, Red Cross, Girl Scouts, and

“It is necessary to clean up the VAT system and plug tax leakage by lifting these unnecessary exemptions so that more revenues can be raised for pro-poor spending. Unfortunately, Senator Angara had chosen to kowtow to the interests of a few rather than look after the welfare of the majority,” Chavez said.

In an attempt to augment the revenue targets from TRAIN, the bill includes new taxes from cosmetic surgeries, coal, and dividends. AER said these new measures were inserted in TRAIN even when their revenue potential, economic impact, and, more important, their impact on the people’s health and livelihood have not been studied.

Health advocates and medical groups also proposed to Angara to include the tobacco tax increase in TRAIN, which is expected to increase government revenues by P40 billion to P60 billion. But, AER said, this fell on deaf ears.