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Tax reform high on LEDAC agenda – NEDA chief

By: - Reporter / @bendeveraINQ
/ 09:02 PM January 29, 2017
Ernesto Pernia

NEDA Director Ernesto Pernia in a press briefing held in Malacañang Palace.
INQUIRER FILE PHOTO/JOAN BONDOC

MANILA — Economic managers will push for the swift passage of comprehensive tax reform as well as a national ID system at the scheduled meeting between President Duterte and leaders of Congress Monday (Jan. 30), according to the country’s chief economist.

Socioeconomic Planning Secretary Ernesto M. Pernia said the Duterte administration’s priority legislative agenda would be discussed at the Legislative Executive Development Advisory Council (LEDAC) meeting scheduled at 2 p.m.

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According to the National Economic and Development Authority website, LEDAC was formed in 1992 through Republic Act (RA) No. 7640 signed by then President Fidel V. Ramos.

The council “serves as a consultative and advisory body to the President, Chair of the NEDA Board, on certain programs and policies essential to the realization of the goals of the national economy,” it said.

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Also, LEDAC “serves as a venue to facilitate high level policy discussions on vital issues and concerns affecting national development,” NEDA added.

According to Neda, LEDAC is chaired by the President and is joined by 19 other members, including the Vice President, the Senate President, the Speaker of the House of Representatives, seven members of the Cabinet designated by the President, three members of the Senate designated by the Senate President, three members of the House of Representatives designated by the House Speaker, a representative of local government units, as well as one representative each from the youth and private sectors.

RA 7640 mandates quarterly LEDAC meetings.

President Duterte’s economic managers early on in the administration pointed out the need to again convene LEDAC to inform the legislative of the executive’s proposed priority legislation in line with its 10-point socioeconomic agenda.

The 10-point agenda was ultimately aimed at slashing the poverty incidence to 14 percent by 2022 from 21.6 percent last year.

Former President Aquino convened LEDAC only twice during his six-year term. The Duterte administration was eyeing to hold LEDAC meetings more frequently, although the plan to hold the first meeting late last year did not push through.

Pernia, who also heads state planning agency NEDA, said the Cabinet’s economic cluster had identified tax reform, the national ID system, the creation of a national transport policy, as well as the establishment of a national water board among the reforms submitted to Congress for passage.

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House Bill No. (HB) 4774 filed by House ways and means committee chair and Quirino Rep. Dakila Carlo E. Cua this month contained the Department of Finance’s proposal to lower personal income taxes, broaden the value-added tax base by cutting down on exemptions, increase excise taxes on petroleum and automobiles, as well as reduce the estate and donors’ tax rates.

Unlike the earlier version of the first package of the DOF’s tax policy reform program that was pitched to Congress last September, HB 4774 will no longer move to remove the value-added tax exemption being enjoyed by senior citizens as well as persons with disabilities.

Instead of the initial proposal of a one-time hike to P6 the excise tax slapped on fuel, HB 4774 instead proposes to implement it in three tranches of P3, P2 and P1 during the first three years, after which the government will implement annual 4-percent indexation of rates to account for inflation.

HB 4774 will also push for tax on lottery, while lowering the estate and donors’ taxes to a flat rate of 6 percent.

Also under the first package, the following tax administration measures will be pursued: mandatory use of fuel marking; mandatory issuance of e-receipts; mandatory interconnection of large and medium firms point of sale machines and accounting system with the Bureau of Internal Revenue; mandatory use of GPS locks when transporting cargo from ports to economic zones and free ports; and relaxation of bank secrecy for fraud cases.

The bill retains the key provisions of the original first package as proposed by the DOF, including adjusting personal income tax brackets to correct “income bracket creeping”; reducing the maximum personal income tax rate to 25 percent over time, save for the “ultra-rich” who would be slapped a higher 35 percent; and shifting to a simpler modified gross system.

Based on the DOF’s computations, the first package will result in a net revenue gain of P162.5 billion in the first year of implementation as the P139.6 billion in foregone revenues form lower personal income as well as estate and donor taxes would be offset by the P302.1-billion gain coming from VAT base expansion (P92.5 billion), higher automobile excise (P31.4 billion), higher excise taxes on petroleum (P120.9 billion) and P57.4 billion in complementary revenues from other revenue measures that may also be passed by Congress.

Finance Undersecretary Karl Kendrick T. Chua has said that tax reform is crucial to help reduce poverty incidence to 14 percent by 2022 from 21.6 percent last year, aid the countrys rise to upper middle income status by the end of the Duterte administration from lower middle income at present, as well as eradicate poverty by 2040.

The Duterte administration’s tax policy reform program, aimed at augmenting the P1 trillion in priority investments needed by the administration in the next six years to sustain at least 7-percent economic growth until 2040 as well as slash the poverty incidence, will come in six packages.

The second package, which would likely be introduced in 2018 or after the Sin Tax Reform Law matures next year, would levy taxes indexed to inflation on sweetened drinks, as well as further hike the excise tax slapped on alcohol and tobacco products.

The four other tax packages include those on corporate income tax and incentives; property tax; capital income tax; and other taxes (carbon tax, “fatty” food tax, lottery and casino tax, as well as mining tax), eyed for passage in the next two to three years.  SFM

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TAGS: ational transport policy, Duterte Administration, Ernesto M. Pernia, House of Representatives, Legislation, legislative agenda, legislative-executive development advisory council, legislature, National Economic and Development Authority, national ID system, national water board, Philippine Congress, Philippine president, Rodrigo Duterte, Senate, tax reform
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