Update
Bayan Muna Rep. Carlos Zarate withdrew his co-authorship of the government tax reform package bill that seeks to expand the value added tax (VAT) base and impose oil excise taxes despite lowering the personal income tax.
In his letter to Majority Leader and rules committee chairperson Rudy Fariñas and copy furnished to ways and means committee chairperson Dakila Cua, Zarate said he is withdrawing his co-authorship of the bill the latest version of which veered away from the original intention of the proposed measure to alleviate the plight of the taxpayers.
Zarate is author of House Bill 333 which was consolidated into the latest version of the bill House Bill 5636.
READ: DOF urges House to pass tax reforms
Zarate said while the consolidated House Bill 5636 lowers the personal income tax, it would impose more taxes on oil products and remove the VAT exemptions on various transactions.
Zarate said the original intention of the bill is to have the oligarchs pay more taxes to benefit the poor and marginalized.
“HB 333, one of the bills consolidated in HB 5636, mainly aimed to initiate a progressive system of taxation, by alleviating first the plight of our people who for the longest time have been overtaxed, yet gravely underpaid,” Zarate said.
But the latest version of the bill shifted the burden instead on the taxpayers who would have to pay more for products and services while allowing the wealthy and corporations to enjoy expanded tax exemption schemes.
“Yet, with the consolidated HB 5636, our underpaid yet already overtaxed majority would even be burdened by higher prices of basic goods and services. The so-called ‘complementary reforms’ tied with the restructured income brackets, like the increase in excise taxes and the expansion of VAT bases, have ironically only made the poor pay more,” Zarate added.
“Meanwhile, rich individuals and corporations expect expanded tax exemption schemes, with investment tax expenditures projected to increase year by year,” he added.
Zarate said the latest version of the government’s comprehensive tax reform package “is not reflective of such an aspiration” for a “pro-people and genuine progressive system of taxation.”
READ: DOF files tax reform package, seeks reduction in income tax | Tax package proposal hurdles House ways and means committee
Under the personal income tax segment of the latest version of the 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.
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.
These rates would be effective July 1, 2017 and the taxable years 2018 and 2019.
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 P600,000 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 P512,000 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 P512,000 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 Department of Finance 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.
READ: Coop representatives vow to fight removal of VAT exemption
The latest version of the bill also seeks to add a new provision to the National Internal Revenue Code by imposing an excise tax on sugar sweetened beverage.
According to the bill, sugar sweetened beverage will be levied with an excise tax of P10 per liter of volume capacity, which will increase by four percent every year after its effectivity in 2018.
The bill defines a sugar sweetened beverage as non-alcoholic beverage that contains caloric sweeteners, added sugars, or artificial/non-caloric sweetener – softdrinks, soda, pop, soda pop; fruit drinks, punches or ades including sweetened beverages like diluted fruit juice; sports drinks; sweetened tea and coffee drinks; energy drinks that contain large amounts of caffeine and sugar; and all non-alcoholic beverages that are ready-to-drink and in powder form with added natural or artificial sugar.
Exempted from the tax package are the following beverages, according to the bill – 100 percent natural fruit juice, 100 percent natural vegetable juice, yogurt and fruit-flavored yogurt beverages with pure fruit and vegetable juice or concentrate; meal replacement beverages and weight loss products; all milk products, infant formula, and milk alternatives such as soy milk or almond milk, including flavored milk like chocolate milk.
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.