4 December 2017


House bicameral conf members urged to reject Senate tax reform bill


Fiscal policy reform advocacy group, Action for Economic Reforms (AER) urges the members of the House of Representatives in the bicameral committee deliberating on the Tax Reform for Acceleration and Inclusion (TRAIN) package 1 to stick with the reforms it passed in House Bill 5636 and reject the bill passed by the Senate.


“For the benefit of poor Filipinos who are banking on the sustained sources of revenues from the reformed tax system, we appeal to our legislators from the House of Representatives to keep the reforms on excise taxes on fuel and automobile and lifting of value added tax (VAT) and reject the zero-rating on VAT of indirect exporters in economic and tourism free zones,” said Jo-Ann Diosana, senior researcher of AER.


Diosana asks the bicameral committee members to go back to the goal of the tax reform: correct structural problems in the personal income and consumption taxes towards a more simple, fair and efficient tax system.


“The Senate’s version of TRAIN will set the economy for the worse. It short-changes the Filipino people of the funds that ought to be mobilized to secure the long-term development financing and mitigation of short-term impact of the reforms on the poor,” Diosana said.


Former economic planning secretary Solita Collas-Monsod questioned the senate’s inclusion of the documentary stamp tax (DST) as no senator bothered to ask the effect on capital markets and other business and financial transactions. She also expressed disgust over the senate bill’s exemption of the real property transactions “only because there is one senator with self-interest on real property.”


Former finance secretary Margarito Teves said some improvements that can be done in the bicameral deliberation of the measures should be on the DST because this would possibly affect overseas Filipino workers.


Economist Gilbert Llanto, president of the Philippine Institute for Development Studies (PIDS) explained: “The arbitrarily higher DST creates friction costs in capital markets that will aggravate our failure to develop this sector. The tax reform proposal presented to us a wonderful opportunity for reform but we seem to have missed the opportunity to make a more efficient and equitable tax system. I call attention to the VAT because it creates distortions. Failure to index certain taxes creates rigidities. Worse, we are introducing more inequity in the system with the automobile tax on lower priced vehicles higher than pricey vehicles.


Atty. Benedicta Du-Baladad, president of the Financial Executives Institute of the Philippines (FINEX) said the TRAIN could have been an opportunity to attract investments in the country to provide employment to the people and additional incomes and savings to participate in the financial market.


Baladad said the DST collections amount to PhP80 billion pesos, PhP39 billion pesos of this from capital transactions.


“By doubling the DST rate, we raise transaction costs. It does not have clear reason but to raise revenue. However, this makes us less competitive with our ASEAN counterparts. The intention of the tax reform was to simplify, make it more equitable, and make ourselves more competitive. However, the exercise has become revenue-driven,” Baladad added.


Diosana said the Senate version clearly makes it inferior to the House bill in addressing the developmental needs of our economy. (END)