Tax reform: down to the wire (3)

PHILIPPINES - In Brief 29 Nov 2017 by Romeo Bernardo

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The Senate finally passed yesterday its tax reform bill (Senate Bill 1592) on third and final reading. Even though the press release headlined a P160-billion expected yield, it left many, including the technocrats in the Department of Finance unimpressed, mainly because senators introduced certain VAT exemptions that are indefensible and sought to plug revenue shortfalls with taxes that will be restructured under future tax packages. For example, in the latest revision, senators added a provision doubling the documentary stamp tax (DST) rates that it claims would yield P40 billion. Many deem the DST, a package 4 reform measure, as opposed to capital market development. The Senate’s passage of the bill is nonetheless welcomed as it paves the way for convening a bicameral conference committee (BCC) to craft a consolidated bill. The BCC will be composed of members of both chambers particularly the chairmen of the respective ways and means committees. While the idea behind the BCC is to reconcile differences in the Senate and House versions of the tax reform bill, in practice it acts as a “third chamber” as members could add or delete provisions in coming up with the final bill. The wide latitude given BCC members gives champions of the tax package hope that the final bill would reflect more of the more thoughtful provisions of the original DoF version. Can the BCC manage the tight schedule before yearend? Knowledgeable people we consulted, while less confident now about what will be reflected in the final version, are still quite optimistic that there will be a new tax law by yearend, expecting the President to exert the necessary pressure at crunch time. Some are banking...