House to present counterproposal to DOF tax reform package

Speaker Pantaleon Alvarez on Monday said the House of Representatives ways and means committee is crafting a counterproposal to the Department of Finance (DOF) tax measure that seeks to remove the value-added tax (VAT) exemptions of elderly and persons with disabilities (PWDs) and to impose additional excise taxes on petroleum products.

In a press briefing, Alvarez said the ways and means committee under the chairmanship of Quirino Rep. Dakila Cua is coming up with new calculations on the offsetting measures in the bill seeking to increase excise taxes as it also lowers personal income tax.

Alvarez said he would meet with the DOF to discuss the counterproposal of Congress.

“Kaya nga inaayos natin ngayon. In fact, we will request for a meeting with the Department of Finance para ma discuss kasi maroon tayong ginagawang parang counter proposal dun sa tax measure,” Alvarez said.

Alvarez said he could not yet give the figures on the counterproposal.

Alvarez earlier said he would block the provisions in the bill removing the VAT exemption being enjoyed by the elderly and PWDs.

READ: Alvarez vows to block removal of VAT exemption on DOF tax package

In the DOF tax reform package submitted to the House ways and means committee, the measure seeks to repeal the laws which have been allowing senior citizens and PWDs VAT exemption—Section 4 of the Expanded Senior Citizens Act and Section 32(a) and 33(a) of the Magna Carta for Persons with Disability.

The bill seeks to repeal the tax perks of the elderly and PWDs as an offsetting measure as it seeks to lower the personal income tax rate. The bill also seeks to impose additional excise tax on petroleum products.

READ: DOF tax package to remove VAT exemptions on elderly, PWDs

In repealing Section 4 of the Expanded Senior Citizens Act or Republic Act 9994, the DOF’s proposed package would remove the twenty percent discount and VAT exemption being enjoyed by senior citizens on the following services and products:

• medicine
• professional fees of attending physicians and licensed professional health
• medical and dental services
• diagnostic and laboratory fees
• actual fare on land, public utility, mass transit, domestic air and sea travel
• hotels and similar lodging establishments, restaurants and recreation centers
• theaters, cinema houses and concert halls, circuses, leisure and amusement
• funeral and burial services for the death of senior citizens

Meanwhile, the bill would repeal Section 32(a) of the Magna Carta for Persons with Disability or Republic Act 10754, the latest amendment of which was just passed under the 16th Congress and signed into law by erstwhile president Benigno Aquino III.

The deletion of the provision effectively removes the following VAT exemption and 20 percent discount of PWDs on the following services and products:

• fees and charges relative to the utilization of all services in hotels and similar lodging establishments; restaurants and recreation centers
• admission fees charged by theaters, cinema houses, concert halls, circuses, carnivals and other similar places of culture, leisure and amusement
• purchase of medicines in all drugstores
• medical and dental services including diagnostic and laboratory fees, and professional fees of attending doctor
• actual fare on land, public utility, mass transit, domestic air and sea travel
• funeral and burial services for the death of the PWD

The bill also seeks to repeal Section 33(a) of the law, which allows for tax incentives to relatives of PWDs within the fourth degree of consanguinity with the PWDs considered as dependents.

The unnumbered bill also 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 new tax brackets would effectively make all income earners below P250,000 tax-exempt, unlike the present tax bracket system:

• Not over P10,000 – 5 percent
• Over P10,000 but not over P30,000 – P500 + 10 percent of the excess over P10,000
• Over P30,000 but not over P70,000 – P2,500 + 15 percent of the excess over P30,000
• Over P70,000 but not over P140,000 – P8,500 + 20 percent of the excess over P70,000
• Over P140,000 but not over P250,000 – P22,500 + 25 percent of the excess over P140,000
• Over P250,000 but not over P500,000 – P50,000 + 30 percent of the excess over P250,000
• Over P500,000 – P125,000 + 32 percent of the excess over P500,000

The new tax bracketing system also increased the tax rate for the highest income earners from 32 percent to 35 percent.

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

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

Finally, 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)

Alvarez vowed that the 17th Congress would not become a rubber stamp of the administration and oppose measures that would pass on the tax burden to consumers.

“Initially nakita ko yan at siguro kailangan i-review dahil as I’ve said the leadership of this Congress is not and will never be a rubber stamp of the administration. Rest assured that this Congress will always be on the side of the people,” Alvarez said. JE/rga