Tax reform: down to the wire?

PHILIPPINES - In Brief 21 Sep 2017 by Romeo Bernardo

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The Senate ways and means committee submitted last night its version of the tax reform package, authored by 14 of 22 active senators. We gather that Senate bill 1592 is very different from both the DoF proposal and the lower house's version, in terms of both the included policy changes as well as the proposed tax rates. For one, we note that the Senate has included in its version increases in capital income taxation (i.e., taxes on interest and dividends) that run counter to the DoF's intent for future tax packages. With those proposals still under study, we expect the DoF to object to their inclusion under package 1. This is most likely why, in contrast to the Senate's P134 billion reported revenue yield, we have been told that the version's estimated yield is only P55 billion, way below the DoF's P157 billion target incremental revenues. We intend to take a closer look at the differences in the coming days. We expect challenging days ahead for the DoF, not only during the bicameral phase when conflicting provisions of the senate and the house tax bills need to be reconciled, but more so in redirecting the reform closer to the executive's original proposal. Will congress be able to pass a (most likely watered down) tax bill before yearend? Perhaps. Right down to the wire.