Lower house of Philippine Congress approves tax reform bill

Claudine Rigal
Juin 2, 2017

Malacañang has welcomed the passage of House Bill 5636 or the Tax Reform for Acceleration and Inclusion Act that it said will lead the country a step towards the golden age of infrastructure.

Voting 246-9 with one abstention, the House approved on final reading House Bill 5636, containing the first of the four tax reform packages of the Duterte administration.

Presidential Spokesperson Ernesto Abella said that the tax reform package, once passed, will raise an estimated P162 billion in annual net revenues, something which is vital to the realization of the Duterte administration's ambitious "Build, Build, Build!" infrastructure program.

Under HB 5636, the maximum rate of personal income tax will be reduced over time from the current 32% to 25%, except for high income earners.

Furthermore, the removal of Value-Added Tax exemption for socialized housing will be conditioned upon the establishment of a hosing voucher system which shall benefit buyers of socialized housing.

The bill was amended so that the 13th month pay up to P100,000 - up from the current P82,000 - will be tax-free.

Meanwhile, the allocation of 40 percent of the yearly incremental revenues generated from the excise tax on petroleum products for the goal of a social benefits program will now be for four years from the intended three years.

The bill, meanwhile, would impose a final tax of 20 percent on lotto winnings P10,000 and higher.

The measure, however, also proposes higher excise taxes on refined petroleum products and automobiles, except for buses, trucks, cargo vans, jeeps, jeepney substitutes, and special objective vehicles.

The revenues shall also be allocated for infrastructure, health, education and social protection expenditures.

The controversial excise tax on petroleum products was retained despite strong opposition from various quarters.

The excise tax on fuel is expected to generate a revenue of P75 billion in 2018; P120 billion in 2019; and, P150 billion in 2020. Auto excise levies for importers will also be raised.

The excise tax for cars will be raised to 3 percent by 2018 and further increased to 4 percent by 2019 if the net manufacturer's price/importer's selling price is up to PHP600,000 for the lower bracket. Militant groups fear the fuel tax could result in higher fares and food prices.

However, the bill removed the Value-Added Tax exemption on the lease of residential units with a monthly rental not exceeding P10,000.

Aside from fuel taxes, the bill also imposes a new sugar-sweetened beverage tax of P10 per liter.

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