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Tax package proposal hurdles House ways and means committee

/ 06:20 PM May 03, 2017
Carlos Dominguez

Finance Secretary Carlos Dominguez III KING RODRIGUEZ/ Presidential Photo

Update

The tax package of the Department of Finance (DOF) seeking to lower the personal income tax and expanding the value-added tax base is a step closer to approval after it hurdled the committee level in the House of Representatives.

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This after the technical working group recommended for approval the bill which was later approved by the mother committee ways and means on Wednesday.

The technical working group met in the morning to tackle the working draft, which was approved by the mother committee in the afternoon.

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At least 17 lawmakers voted to approve the unnumbered substitute bill, while four were against. Three lawmakers abstained.

This after the ways and means committee on March 14 ruled to put the bill back to the drawing board as seconded by former president now Pampanga Rep. Gloria Macapagal-Arroyo.

The administration’s tax reform package seeks to lower personal income tax, raise excise tax slapped on oil and vehicles, expand the value-added tax (VAT) base, among others.

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

Under the personal income tax segment of the approved bill, taxpayers earning up to P250,000 a year will enjoy tax exemption, while those earning P250,000 to P400,000 will pay a 20-percent tax on the excess over P250,000.

Those earning P400,000-800,000 will pay P30,000 plus 25 percent of income in excess of P400,000.

Taxpayers earning P800,000 to P2 million will pay P130,000 plus 30 percent in excess of P800,000.

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Those earning P2-5 million will be taxed P490,000 plus 32 percent of the income in excess of P2 million.

The wealthiest, or those earning more than P5 million annually, will be taxed P1.45 million plus 35 percent in excess of P5 million.

Meanwhile, under the auto excise tax segment, the bill seeks to put an ad valorem tax on automobiles based on the manufacturer’s or importer’s selling price, net of excise and value-added tax.

Unlike the first version, the auto excise tax segment will be staggered into two phases in 2018 and 2019.

Effective 2018, the excise tax for automobiles will be raised to three percent from the present two percent if the net manufacturer’s price/importer’s selling price is up to P600,000.

If the price is P600,00 to P1.1 million, the tax rate will be P18,000 plus 30 percent of value in excess of P600,000. The present tax rate is P12,000 plus 20 percent of value in excess of P600,000.

If the price is over P1.1 million to P2.1 million, the tax rate will be P168,000 plus 50 percent of value in excess of P1.1 million. The present tax rate is P112,000 plus 40 percent of value in excess of P1.1 million.

If the price is P2.1 million to P3.1 million, the tax rate will be P668,000 plus 80 percent of value in excess of P2.1 million. The present rate is 512,000 plus 60 percent of value in excess of P2.1 million.

Lastly, if the price is P3.1 million, the tax rate will be P1.468 million plus 90 percent of the value in excess of P3.1 million.

Meanwhile, effective 2019, the excise tax for automobiles will be raised to four percent from the present two percent if the net manufacturer’s price/importer’s selling price is up to P600,000.

If the price is P600,000 to P1.1 million, the tax rate will be P24,000 plus 40 percent of value in excess of P600,000. The present tax rate is P12,000 plus 20 percent of value in excess of P600,000.

If the price is over P1.1 million to P2.1 million, the tax rate will be P224,000 plus 60 percent of value in excess of P1.1 million. The present tax rate is P112,000 plus 40 percent of value in excess of P1.1 million.

If the price is P2.1 million to P3.1 million, the tax rate will be P824,000 plus 100 percent of value in excess of P2.1 million. The present rate is 512,000 plus 60 percent of value in excess of P2.1 million.

If the price is over P3.1 million, the tax rate will be P1.824 million plus 120 percent of the value in excess of P3.1 million.

The first version of the bill seeks to remove the VAT exemption of senior citizens and persons with disabilities (PWDs), but the DOF later took this back and retained the perks for the elderly and PWDs in the tax package.

READ: It’s official: VAT exemptions on senior citizens, PWDs retained 

Meanwhile, the bill seeks to lift the VAT exemption on sales by agricultural cooperatives, gross receipts from lending activities by credit or multi-purpose cooperatives, sales by non-agricultural, non-electric and non-credit cooperatives, and sales of real properties not primarily held for sale, lease of residential unit with a monthly rental not exceeding P10,000.

Lastly, the bill seeks to impose on diesel fuel oil, kerosene, liquefied petroleum gas and bunker fuel oil a P3 per liter excise tax effective 2018, P5 per liter excise tax effective 2019, and P6 per liter excise tax effective 2020. These have no excise tax under the current tax system.

The bill will also increase the excise tax already imposed on lubricating oils and greases, processed gas, waxes and petrolatum, denatured alcohol for motive power, naphtha, regular gasoline, leaded premium gasoline, aviation turbo jet fuel, and asphalts.

After the approval, the ways and means committee forwarded the bill to the appropriations committee for funding.

Meanwhile, lawmakers are also mulling the idea of inserting in the DOF tax package during the period of amendments a provision seeking to impose an excise tax on sweetened beverages.

Finance Undersecretary Karl Kendrick Chua welcomed the “substantial progress” by the ways and means committee on the administration’s tax reform program.

“We made a substantial progress today. It was approved by the committee. The TWG recommended a substitute bill and the committee approved it today. So the next step is to send to appropriations committee because there are earmarkings and then after that it will be sent to the mother committee and it can be referred to the plenary,” Chua said.

He added that the target is to have the bill approved on final reading before the first regular session ends on June 2.

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