Finance Secretary Carlos G. Dominguez III on Thursday unveiled details of the planned and much-awaited tax amnesty program aimed at shoring up revenues to fund the massive infrastructure projects to be rolled out by the Duterte administration.
“This year, we hope to improve further our revenue collections with a proposed tax amnesty program. The program will help clear the dockets as well as enable the transfer of stranded real properties so that they can be made economically useful,” Dominguez said in a speech before the Rotary Club of Manila.
“In particular, we propose an estate tax amnesty where the government collects only 6 percent of the net undeclared estate tax for those who died prior to January 1, 2018,” Dominguez said.
He noted that estate tax used to be a higher 20 percent.
Also, the Department of Finance was “proposing a general tax amnesty on all unpaid internal revenue taxes excluding internal revenue taxes arising from importation and customs duties,” Dominguez added.
The Finance chief said that they also wanted to offer amnesty on tax delinquencies, at a rate of 50 percent on the basic tax, excluding interest charges and surcharges.
“For those already facing criminal cases in court, we are proposing a rate of 80 percent of the basic tax only,” he added.
Dominguez earlier said that the government was eyeing to implement the much-awaited tax amnesty by April next year to coincide with the deadline of filing income tax returns.
Tax amnesty forms part of tax reform package “1B,” an off-shoot of the Tax Reform for Acceleration and Inclusion (TRAIN) Act signed by President Duterte last December.
Besides general tax amnesty, package 1B also includes estate tax amnesty, higher motor vehicle user’s charge, bank secrecy relaxation and automatic exchange of information.
Tax package 1B was a result of the Senate’s removal of the tax administration measures from the original first tax reform package passed by the Lower House last year under House Bill No. 5636.
Once package 1B is passed, it will add about P40 billion in revenues.
The DOF was optimistic that the tax reform package 1B will be passed by Congress in the third quarter.
Dominguez said that another reform that the DOF proposes was to treat value-added tax (VAT) as “purely a consumption tax.”
“As such, it will be collected at the point of consumption or sale, and it will be refunded when the consumption is done outside the Philippines. VAT exemptions should not be granted as investments incentives,” he said.
In general, “the tax reform program will assure us of sufficient revenues to fund the infrastructure modernization and expand social services,” Dominguez said.
“Thirty percent of incremental revenues generated from the tax reform law will go to pay for social services. There will be larger allotments for improving public health, upgrading our educational system and providing conditional cash assistance for the poorest of the poor. This, after all, is what modern governments are about: looking after the welfare of its people and providing them effective protection. Meanwhile, about 70 percent of the revenues raised from the new law will be directed to infrastructure modernization,” the Finance chief said.
Besides the TRAIN Law, up to five more tax packages, including pending legislation on corporate income taxation reform coupled with the rationalization of fiscal incentives, will be pursued by the Duterte administration.