Solons warn DOF tax reform package to pass on burden to consumers

Lawmakers from the minority bloc in the House of Representatives slammed the Department of Finance (DOF) on Tuesday for its tax reform package that seems to pass on the burden of tax to the consumers despite a reduction in the personal income tax.

In a press briefing, Albay Rep. Edcel Lagman said the bill may reduce the personal income tax, but it would impose offsetting measures such as increasing the tax on oil, as well as removing the exemption from value-added tax (VAT) of senior citizens and the persons with disabilities (PWDs).

READ: DOF files tax reform package, seeks reduction in income tax

“With respect to the reduction of personal income tax, this will not really benefit the poor, who are already exempted from payment of tax or low income earners who are exempted from the payment of tax,” Lagman said.

Lagman said removing the personal income tax would not be the solution to resolving poverty if only it would be worsened by additional taxes.

“If we are addressing the problem of poverty, then reducing the personal income tax to 25 percent is not a solution. But that is compounded by the proposal of government to increase excise taxes on petroleum products, and rationalize the VAT,” Lagman said.

“All of these would entail the collection of more taxes, and these taxes are what we call cascading taxes. In other words, the burden of the tax is passed on to the final consumer and the public, many of whom are the poor who did not benefit from the reduction of the personal income tax rate,” he added.

In the DOF’s proposed tax measure filed to the House of Representatives ways and means committee, the unnumbered bill seeks to amend the National Internal Revenue Code to impose two tax schedules in 2018 and 2019.

The DOF proposed tax schedule for 2018 is:

• Not over P250,000 – zero percent
• Over P250,000 but not over P400,000 – 20 percent of the excess over P250,000
• Over P400,000 but not over P800,000 – P30,000 + 25 percent of the excess over P400,000
• Over P800,000 but not over P2 million – P130,000 + 30 percent of the excess over P800,000
• Over P2 million but not over P5 million – P490,000 + 32 percent of the excess over P2 million
• Over P5 million – P1.45 million + 35 percent of the excess over P5 million

In the DOF’s proposed tax schedule for 2019, the tax for personal income would further go down:

• Not over P250,000 – zero percent
• Over P250,000 but not over P400,000 – 15 percent of the excess over P250,000
• Over P400,000 but not over P800,000 – P22,500 + 20 percent of the excess over P400,000
• Over P800,000 but not over P2 million – P102,500 + 25 percent of the excess over P800,000
• Over P2 million but not over P5 million – P402,500 + 30 percent of the excess over P2 million
• Over P5 million – P1,302,500 + 35 percent of the excess over P5 million

The bill also repealed the tax exemption on 13th month pay and other benefits not exceeding P82,000 in the public and private sector.

Meanwhile, the bill would increase the excise taxes on petroleum products, including imposing new taxes on petroleum products that were previously not imposed with excise tax:

• Lubricating oils and greases – P10 per liter (from P4.5)
• Processed gas – P6 per liter (from P0.05)
• Waxes and Petrolatum – P10 per kilogram (from P3.5)
• Denatured alcohol – P6 per liter (from P0.05)
• Naptha, regular gasoline – P10 per liter (from P4.35)
• Leaded premium gasoline – P10 per liter (from P5.35)
• Unleaded premium gasoline – P10 per liter (from P4.35)
• Aviation turbo jet fuel – P10 per liter (from P3.67)
• Kerosene – P6 per liter (from zero)
• Diesel fuel oil – P6 per liter (from zero)
• Liquefied petroleum gas – P6 per liter (from zero)
• Asphalts – P6 per kilogram (from P0.56)
• Bunker fuel oil – P6 per liter (from zero)

The DOF’s proposed bill also seeks to repeal the laws that allowed senior citizens and PWDs VAT exemption—Section 4 of the Expanded Senior Citizens Act, and Section 32(a) of the Magna Carta for Persons with Disability.

For his part, ways and means committee chairperson Quirino Rep. Dakila Cua said he would not sugarcoat the bill that lists down offsetting measures despite the reduction of personal income tax.

“Hindi naman natin i-su-sugar coat  (I won’t sugarcoat) that we are promising miracles for the consumer. The goals of this tax reform package is to make it more equitable and progressive. Ang gusto po natin mangyari diyan (What we would like to implement is), if you earn more, you pay a bigger percentage and contribute more to the nation,” Cua said in a separate interview.

Cua said his committee would also study the provision of the bill removing the VAT exemption being enjoyed by the elderly and (PWDs).

“Pati nanay ko magagalit saken diyan (Even my mother would get mad at me because of it). We’ll really study it,” Cua said.

During the minority bloc press briefing, Caloocan Rep. Edgar Erice said instead of resorting to offsetting measures, there are other tax measures that could plug in the revenue loss due to lowering personal income tax, such as taxing sweetened beverage instead.

“It will also impact on the industries. There are still a lot of measures being considered by the ways and means committee, for example, the additional taxes on soft drinks… Yun muna isipin nila (They should consider it first),” Erice said. RAM