Expect more tax reform laws under Duterte administration – gov't

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Metro Manila (CNN Philippines, January 8) — Even as the public braces for the effects of the new tax reform law, a heads-up from the government: there's more coming.

The Tax Reform for Acceleration and Inclusion (TRAIN) law, signed by President Rodrigo Duterte in December, is just one of the five tax packages under the administration's comprehensive tax reform plan.

The TRAIN law, which took effect on January 1, 2018, has a second phase — Package 1B — which is still pending in Congress. Package 1B will include estate tax amnesty, a general tax amnesty, adjustments in the motor vehicle users charge, and amendments to the bank secrecy law.

In a media briefing on Monday, Finance Secretary Sonny Dominguez said Phase 1B will add some P38.9 billion to the P89.8 billion revenues expected to be generated by  the TRAIN law.

Why more tax reforms are needed

Dominguez said the government needs to make sure it has money to fund a good portion of its programmed expenses.

"Package 1B is crucial to keep the 3 percent of GDP (gross domestic product) deficit target. To meet this target for the rest of the administration, we will need to pass Packages 2 to 5. No succeeding packages means either a breach of this deficit which will hurt our economy or a cut in government spending possibly compromising the president's infrastructure program," he explained. 

Dominguez said that if the GDP deficit target is not met, the government will need to borrow money to achieve its goals, which is not ideal.

"It is not wise to borrow everything. Just like any business, you have to have your own capital. This is our capital," he said.

The main goal of the tax reform program is to raise about 25 percent or roughly P2 trillion of the administration's infrastructure program valued at P8 trillion.

The Finance Secretary stressed some of the tax packages are "revenue neutral," which means they won't come with higher taxes.

"The other tax packages are not so much increasing taxes. It is just making it fair," he said.

One of these "revenue neutral" measures is Package 2, which is slated to be submitted to Congress this month.

It will lower corporate income taxes and modernize fiscal incentives.

Packages 3 and 4 are expected to reach Congress within the year.

Package 4, another revenue neutral measure, will adjust passive income and financial taxes.

Dominguez said the government is still assessing if Package 5 is necessary since some of its provisions were already incorporated in the enacted TRAIN law.