MANILA - Non-government organization Action for Economic Reforms (AER) on Friday said the ratified Tax Reform for Acceleration and Inclusion (TRAIN) bill opens room for leakages and will worsen some existing problems despite its promise of generating revenues to drive the administration’s “Build, Build, Build” program.
“We think it’s a mixed bag of nuts. You have greater relief for the working class. The middle class and even the rich will be relieved because of the lower income tax,” AER senior economist Jo-An Latuja Diosana told ABS CBN News.
“One of the primary purposes of the reform is to clean the VAT (value-added tax) system of unnecessary exemptions because it creates leakages and room for gaming, but the ratified bill still doesn’t address that and even adds new exemptions,” she added.
Diosana also said the last minute inclusion of the tobacco excise tax in the first package of the tax reform program remains questionable.
“We we’re surprised that it was included in the bicam (bicameral conference committee) because the House did not include it, Senate did not include it, the last minute it was included,” she said.
Under TRAIN, a "very low" P32.50 hike will be imposed on tobacco excise tax from January to June 2018, P35.00 from July to December 2018 (to remain in effect until 2019), P37.50 from 2020 to 2021, P40 from 2022 to 2023, and a 4 percent annual indexation from 2023 onwards.
“For us, it is a question mark why it was included and given a very low rate. We cannot help but think that there was some lobbying done to preempt higher tax increase early next year on tobacco,” she added.
Diosana, on the other hand, believes the impact of the additional coal excise tax is still negligible despite its looming effect on electricity prices.
Under the TRAIN bill, coal excise tax rates will be P50.00 per metric ton in 2018, P100.00 in 2019, and P150.00 for 2020 onwards.
What is questionable, Diosana said, is the absence of a repeal clause lifting the exemption of locally produced coal from the excise tax hike.
“The current version now has no repeal clause to lift the exemption for domestic coal being exempt from excise tax, so while the... added provision on coal says that it includes domestic and imported coal, the repeal clause is necessary to make it so that there will be no questions around it,” she said.
There's hope, said Diosana, if President Rodrigo Duterte decides to veto provisions of the TRAIN bill before signing it into a law.