First of all, the Duterte government has drawn up ambitious plans to introduce tax reforms. This will allow the rural areas to keep pace with the growth of the rest of the developed regions, particularly the Metro areas. The government has assured that all the backward areas will be specially provided extra funding.
Due to the funings, they will come abreast with the rest of the country in all ways.
Hence, the Department of Finance has drawn up plans to introduce tax reforms. Additional revenue will be generated in a planned and regular manner, it will be employed to fund projects in Mindanao region to ensure wholesome development. The area is poverty stricken and needs to be provided stimulus to make it grow.
The provision of extra funding will pave the way for all round growth and development of the financial profile of the people in general.
Towards this end, it is planned that the revenue will be recouped from imposing taxes on many luxury items and lifestyle habits. The items that will be taxed are as follows:
1. Sugar products,
2. Fatty foods,
3. Luxury cars,
4. Gambling.
The above list is just a sample and is not exhaustive; there are many more items in the list that have been drawn up by the Department of Finance (DOF) as per the instructions of the President of the Philippines.
Carlos Dominguez III the Secretary of Finance issued a statement that the revenue so generated will be used exclusively to provide succor to the war-torn areas of Muslim Mindanao.
This was the quickest response that the government gave to the under-developed areas at the moment; this will be followed by more channels of funding so that the maximum benefit can be given to kick-start development as soon as possible.
The final shape was given to an ambitious package which would see a total outlay of about P 600 billion with the new tax reforms contributing P 400 billion or two-thirds of the total; the other P 200 billion is contemplated from the Bureau of Customs which is likely to contribute this amount through more effective curbs on corruption and smuggling activities.
There are likely to be more agencies that will contribute to these funds to sustain the development activities.
The plan envisages that the work will be implemented phase-wise so that it can be converted to a success gradually; it is thought that, from the first year onwards, the maximum slab for personal Income Tax would be brought down from the present 32% to 25%. This stepping-down will be managed gradually depending on the progress.
Moreover, the slab system itself may be suitable modified to be more people-friendly; the basic rule that will be followed is that the highest earners will pay more proportion of the tax.
These proposals may entail a loss in revenue to the tune of P 139 billion to the exchequer but there are plans to offset this loss from an expansion of the base of the Value Added tax (VAT); this will be achieved by withdrawing or
1. Reducing the various exemptions that are in force for:
a. Raw foods,
b. Education, and
c. Health Sector.
2. Increase the Excise Tax by:
a. Index the tax on petroleum products to inflation so that it takes care of fluctuations,
b. Levy tax per kilo of sugar products like:
i. Sugar substitutes,
ii. Domestic raw sugars,
iii. Refined sugars, and
iv. Imported Sugar.
c. Relaxing the secrecy laws of the banks for the cases of fraud so that more revenue becomes available through increase in legality of certain funds, and
d. Introduce changes to legislation so that tax evasion is made a crime that is a predicate to money laundering.
In an additional step that is likely to be introduced next year for passage in the Senate; this will also be a reform package that seeks to reduce the highest slab rate in Corporate Income tax to be also introduced in a phase-wise manner.
This bill will reduce the Corporate Income tax from the current 30% to 25% but this proposal will also take into consideration the history of compliances by the tax-paying corporate; meanwhile, the Department of Finance is also working on a novel scheme to rationalize the incentives that are being provided to the investors.
The government will introduce a third package too.
This package will be introduced in 2018; this will seek to lower the rates of taxation on donor’s taxes and for the estates while also reducing the various taxes on registration fees, transfer tax and on land (DST).
Land valuation should be in tune with the market prices or as near to that as possible.
And, that still not all!
Furthermore, a fourth package iwill be introduced in 2019.
This time around, the tax is reduced and the tax on income generated from deposits and investments of the Peso will be cut from the current 20% to about 10%.
Furthermore, the plan to offset is simple:
• The Tax rates for capital investments and deposits will be rationalized,
• Equities,
• Dividends,
• Provide income rates close to 10%,
• Increase tax that will be charged on the stocks being traded in the stock markets from 0.5% up to 1%.
While financial wizards of the Duterte government look for ways and means to further the financial agenda some of the most notable ones are:
1. A novel fatty-foods tax,
2. Taxes on Mining, Carbon tax,
3. Tax on luxury cars,
4. Tax on Yachts,
5. Tax on Jewelry,
6. Tax on Casinos,
7. Tax on Lotteries, and
8. Review taxes on alcohol and smoking.
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