Prepared by the Makati Business Club (MBC) Secretariat MBC_version_08 September 2016

DEPARTMENT OF FINANCE PROPOSED TAX REFORM MEASURES WITH REVENUE ESTIMATES

Estimated Loss (high-end Estimated Revenue (high-end

Proposed Measures revenue impact by 2019 Proposed Off-setting Measures revenue impact by 2019 (PHP NET (in PHP billion)
(PHP billion) billion)

Package 1: Personal Income Tax and

Consumption -159 359.7 200.7
VAT base expansion 163.4
Lower PIT rate to 25% -159 Excise tax on oil 178.2
Sugary product tax 18.1
Package 2: Corporate Income Tax and
Incentives -34.8 33.8 -1.0
Lower CIT rate and remove optional
-34.8
standard deductions Fiscal incentives rationalization 33.8
Full VAT Refund TBD

Package 3: Property Tax -3.5 43.5 40.0

Reduce estate and donor tax -3.5 Centralized and increased valuation 43.5

Package 4: Capital Income Tax

-1 -1.0
Harmonize rates for all assets -1
Package 5: Other Taxes 0 129.4 129.4
Luxury tax (e.g. automobile etc) 7.7
Mining tax 3.5
Sin tax on alcohol and tobacco 58.2
Fatty food tax (rough estimate) 20
Carbon tax (rough estimate) 20
Lottery & casino tax (rough estimate) 20
NET IMPACT FROM TAX POLICY REFORM Php 368.1 billion
PLUS: REVENUE FROM TAX ADMINISTRATION REFORM Php 200 billion

TAX REFORM GOAL BY 2019 PHP 568.1 billion

Prepared by the Makati Business Club (MBC) Secretariat MBC_version_08 September 2016

INPUTS TO THE PROPOSAL

Name of Group:

Initial Position (pls. select

Proposed Measures DETAILS OF THE PROPOSED MEASURES Comments and Recommendations
from drop down list)
DOF PACKAGE 1: PERSONAL INCOME TAX AND CONSUMPTION

Adjust rates and brackets as below:

YEAR 1:
Not over P250,000: P2,500 fixed tax
Over P250k-P400k: P2,500 + 20% excess over P250k
Over P400k-P800k: P32,500 + 25% excess over P400k
Over P800k-P2M: P132,500 + 30% excess over P800k
Over P2M-P5M: P492,500 + 32% excess over P2M
Over P5M: P1,452,500 + 35% excess of P5M
Lower Personal Income Tax (PIT) rate
to 25%
YEAR 2 ONWARDS:
Not over P250,000: P2,500 fixed tax
Over P250k-P400k: P2,500 + 15% excess over P250k
Over P400k-P800k: P25,000 + 20% excess over P400k
Over P800k-P2M: P105,000 + 25% excess over P800k
Over P2M-P5M: P405,000 + 30% excess over P2M
Over P5M: P1,305,000 + 35% excess over P5M

Expand the VAT base by limiting exemptions to raw food and other
necessities (e.g. education, health) and removing unnecessary VAT
exemptions.

Specifically for Senior Citizens, DoF is planning to review the VAT exemption
extended to senior citizens and instead consider providing alternative
Value Added Tax (VAT) base measures such as higher pension or cash transfers like 4Ps.
expansion
DoF is designing a proposed targeted subsidy programs to protect the poor
and vulnerable from the plan to adjust excise taxes on petroleum products.
Some of the interventions being considered include cash transfers and
increased spending on social protection programs, such as discount on public
utility vehicles, lifeline subsidy on electricity for low income consumers, and
higher PhilHealth coverage for persons with disabilities
Prepared by the Makati Business Club (MBC) Secretariat MBC_version_08 September 2016

Initial Position (pls. select

Proposed Measures DETAILS OF THE PROPOSED MEASURES Comments and Recommendations
from drop down list)
Increase excise on all petroleum products and index to inflation
Excise tax on oil

Sugary product tax Levy a tax on sugar products and index to inflation

DOF PACKAGE 2: CORPORATE INCOME TAX AND INCENTIVES

Reduce CIT rate to 25% over time

Lower CIT rate and remove optional
standard deductions (OSD) Simplify other CIT provisions to improve compliance
(see legislative matrix, separate document)
Limit the VAT-zero rating to direct exporters.

Full VAT Refund

DoF also proposes to give full VAT refund in cash and to abolish the grant of
tax credit certificates.
Rationalize the grant of fiscal incentives by making the grant of incentives
transparent, targeted, time-bound, and performance-based

Replace the 5% gross income earned tax rate to a reduced CIT rate of 15%;
Rationalize fiscal incentives
Expand the coverage of the Fiscal Incentives Review Board to include all
incentive recipients beyond GOCCs.
(see legislative matrix, separate document)

DOF PACKAGE 3: PROPERTY TAX

Improve properly tax collection by lowering the rate of taxes on transfers of

properties such as estate tax and donors tax.
Reduce estate and donor tax
Lower the rate of transaction taxes on land such as documentary stamp tax,
transfer tax, and registration fees).
(see legislative matrix, separate document)
Prepared by the Makati Business Club (MBC) Secretariat MBC_version_08 September 2016

Initial Position (pls. select

Proposed Measures DETAILS OF THE PROPOSED MEASURES Comments and Recommendations
from drop down list)
Rationalizing the valuation of real properties by updating the market values
and making it closer to prevailing market prices.

Centralized and increased valuation Review valuation every 3 years and adjust accordingly.

DOF PACKAGE 4: CAPITAL INCOME TAX

Reduce the tax on capital income and harmonize the varying tax rates for
dollar deposits, investments, dividends, and equity towards 10%.
Harmonize rates for all assets
Increase tax on stocks trade in the stock market from 0.5% to 1.0% of gross
selling price.

DOF PACKAGE 5: OTHER TAXES

Impose a luxury tax on motor vehicles, yachts, and jewelry. No further details
Luxury tax available.
Mining tax No available information about this proposal
No details from DOF regarding this proposal. However, under RA10351 or
the Sin Tax Reform Act of 2012, the government has a specific price rate
increase in excise tax on cigarettes and alcohol products from 2013 until
2017. Starting 2018, the levy will be raised by 4 percent every year. Beginning
January 2017, tax on all cigarettes brands shall be a uniform of P30 per pack,
effectively eliminating the two-tier tax treatment imposed on low- and high-
priced brands. Likewise, tax on all fermented liquors, including beers, will go
up to P23.5 per liter next year, while the specific tax on distilled spirits will
rise to P21.63 per proof liter.
Sin tax on alcohol and tobacco
Prepared by the Makati Business Club (MBC) Secretariat MBC_version_08 September 2016

Initial Position (pls. select

Proposed Measures DETAILS OF THE PROPOSED MEASURES Comments and Recommendations
from drop down list)
Tax high sugar products and unhealthy products such as junk food and soft
drinks, or fatty food tax.

There is also a plan to levy a P5-a-kilo excise tax on sugary products,

including domestic raw sugar, refined sugar as well as imported sugar and
Fatty food tax sugar substitutes, which will result in fresh revenues worth P18.1 billion.

One bill in the 17th Congress, HB 292, that proposes to tax sugar sweetened
beverages (see legislative matrix, separate document)

Carbon tax No available information about this proposal

DoF is looking into possibly imposing lottery and casino tax (no details of
this proposal yet).

Meanwhile, PAGCOR seeks to remove the gaming tax relief.

Lottery and casino tax Presently, private gaming firms licensed by PAGCOR to operate are allowed
to be subjected to 5% franchise tax on gross gaming revenues, in lieu of all
taxes, instead of being burdened by the regular 30% CIT rate. This is provided
under Sec. 13(2) of PAGCOR Charter (P.D. No. 1869).

DOF PROPOSAL: TAX ADMINISTRATION REFORMS

DoF wants to relax bank secrecy law involving fraud cases and to include tax
evasion as a predicate crime to money laundering. This proposal covers all
types of accounts: both deposits and investments, and peso as well as foreign
currency. This would require an act from Congress amending the Law on
Secrecy of Bank Deposits or R.A. 1405.
Amend Bank Secrecy Law
According to BSP, the country's restrictive law may attract illicit funds into
our system since bank records are prohibited from being examined by
government without written consent from the depositor or upon order of the
court in certain cases.
Prepared by the Makati Business Club (MBC) Secretariat
Proposed Measures
Legislate a final Tax Amnesty
BUREAU OF INTERNAL REVENUE (BIR) LEGISLATIVE PRIORITIES
Lower Personal Income Tax
Tax Amnesty Law
Exempt BIR personnel from Salary
Standardization
BUREAU OF INTERNAL REVENUE (BIR) ADMNISTRATIVE PRIORITIES
Predetermined Custom Duties
Re-engineered RATS program
Computer-assisted Audit
MBC_version_08 September 2016
Initial Position (pls. select
DETAILS OF THE PROPOSED MEASURES Comments and Recommendations
from drop down list)
Some actions being explored by DoF:
No further amnesty for 25 years
Exception: Criminal cases
Absolute amnesty: availment clears all tax dockets in BIR, BOC, and in other
courts
Higher amount for delayed amnesty payment (e.g. no interest and
surcharge for the first month, begin charging interest in the third month, and
surcharge in the fifth month)
Minimum amnesty payment: 40% of basic deficiency
Differential treatment for Court of Tax Appeals cases:
With assessments compromise
Without assessments pay a 5% tax on net worth
Adjust rates and brackets as below:
Not over P500,000: 0%
Over P500k - P1M: 10% excess over P500k
Over P1M P2.5M: P50,000 + 15% excess over P1M
Over P2.5M P5M: P275,000 + 20% excess over P2.5M
Over P5M : P775,000 + 25% excess over P5M
No more personal and additional exemptions for all individuals
No more De Minimis and tax benefits
Have Large Wage Earners taxpayers classification
Similar to DOF proposal above
Removal of BIR from salary standardization and civil service protection to
attract staff competence and discourage corrupt practices.
Prepared by the Makati Business Club (MBC) Secretariat MBC_version_08 September 2016

Initial Position (pls. select

Proposed Measures DETAILS OF THE PROPOSED MEASURES Comments and Recommendations
from drop down list)
Restructuring plan:

FOR EMPLOYEES:
Expand the base from 13 million to 30 million
Focus on C-level Category
Estimated gains = P37 billion

FOR SELF-EMPLOYED & PROFESSIONALS:

Streamline and Simplify Compliance
Requirements
Expand the Self-employed taxpayer base from 2M to 5M
Expand the Professionals taxpayer base from 200K to 2M
Propose a flat tax rate of 10%
Combine with a Tax Amnesty Law
Estimated gains = P74 billion

FOR CORPORATION (Large business):

Expand the base from 2,000 to 5,000
Combine with a Tax Amnesty Law
Estimated gains = P136 billion
Allow abatement and legal
compromises
Focus on large taxpayers and high net
worth individuals