Finance Secretary Carlos Dominguez III said the government is now one big step closer to reforming the country’s tax system for the first time in over two decades–and providing a steady revenue stream to its ambitious infrastructure buildup–with the Senate’s approval of its version of the proposed Tax Reform for Acceleration and Inclusion Act (TRAIN).
Thanking the Senate for approving its version of TRAIN on third and final reading, Dominguez expressed hopes that both chambers could wrap up bicameral deliberations on the first of the government’s five tax reform packages in time for the submission of the final version to President Duterte by December–so that a new law to this effect could be signed and implemented as scheduled by January 2018.
Dominguez said “the Senate’s timely approval of its TRAIN version moves the government one big step closer to overhauling the tax system for the first time in two decades with the primary benefit going to 99 percent of the country’s taxpayers who are to get higher take-home pay as a result of substantial cuts in their personal income tax rates or–better yet–outright exemption from income taxation.”
The Senate on Tuesday night voted 17-1 to pass the TRAIN on final reading.
Senate Bill (SB) No. 1592, the chamber’s version of the TRAIN, was sponsored by Senator Juan Edgardo Angara, who chairs the Senate ways and means committee.
According to Angara, “under the Senate-approved tax reform package, 60 percent of the incremental revenues will go to infrastructure programs, 27 percent will be allocated to social protection programs including the unconditional cash transfer to the poorest 10 million Filipino families and health, nutrition and anti-hunger programs, while 13 percent will be allocated to military modernization programs.”
“We thank the Senate for its vote on its version of the tax reform bill. We hope that with the Senate’s swift action on the measure, the two chambers of the Congress can soon sit down in the bicameral conference committee to thresh out a reconciled version of the bill that would provide the most benefit for the majority of the Filipinos while raising additional revenues to support our infrastructure modernization program,” Dominguez said.
“We are hoping that a final congressional version of the TRAIN could be sent to the President’s desk by December, so the tax reform bill could then be signed into law and implemented as scheduled by January next year,” he said.
House Bill (HB) No. 5636, the TRAIN version approved by the House of Representatives last May 31.
The Senate version provides additional revenue-generating measures that are not in the House version of TRAIN. But both Senate and House versions provide for tax exemptions for those earning P25o,ooo and below.
Among the additional TRAIN measures approved by the Senate on third and final reading are the doubling of the prevailing documentary stamp tax (DST) rates, except for property, which will remain as is, and loans, which will increase by 50 percent.
The DST increases include those on bank checks that will double from P1.50 to P3; on original issue of shares of stock, P1 to P2; and sales or transfer of shares of stock, P0.75 to P1.50.
Last May, President Duterte certified as an urgent and priority measure for congressional approval the TRAIN, which, he said, is crucial to the financial sustainability of the government’s ambitious agenda to sustain the country’s growth momentum and accelerate poverty reduction via a massive spending on infrastructure, human capital and social protection for the poor and vulnerable sectors.
In separate letters sent to Senate President Aquilino Pimentel III and Speaker Pantaleon Alvarez, the President said: “The benefits to be derived from this tax reform measure will sustainably finance the Government’s envisioned massive investments in infrastructure thereby encouraging economic activity and job creation, as well as fund the desired increase in the public budget for health, education and social programs to alleviate poverty.”
The DOF submitted to the House of Representatives its original TRAIN proposal in September last year, which was later modified and introduced in the chamber by Quirino Rep. Dakila Carlo Cua as HB 4774 and later consolidated with other tax reform-related measures as HB 5636.
This House version was finally approved by the House before the adjournment of the first regular session of the 17th Congress last May.
The Senate ways and means committee began the deliberations on the TRAIN, which was filed in the chamber by Senate President Aquilino Pimentel III as Senate Bill (SB) No. 1408, last March 22.
The Senate began conducting plenary debates on the revised measure, SB 1592, on Nov. 22 and finally approved it with substantial amendments last Nov. 28.
Dominguez earlier said that, “To sustainably finance these massive investments in infrastructure and in the people, tax policy reform will be crucial alongside tax administration and budget reforms.”
“The tax reform bill seeks to achieve a simpler, fairer, and more efficient tax system characterized by lower rates and a broader base, to encourage investment, job creation, and poverty reduction,” Dominguez said.
According to Dominguez, the TRAIN bill is “expected to help reduce poverty rate from 21.6 percent in 2015 to 14 percent in 2022, lifting some six million Filipinos out of poverty, and helping the country achieve upper middle-income country status where per capita gross national income increases from $3,500 in 2015 to at least $4,100 by 2022.”