By Chino S. Leyco
Finance Secretary Carlos G. Dominguez III said that the Duterte administration would not allow the national government to incur additional fiscal deficit once its proposed second tax reform measure is passed into law.
Finance Secretary Carlos G. Dominguez III
On the sidelines of the Land Bank Anniversary late Wednesday, Dominguez maintained that the tax reform for attracting better and high-quality opportunities (TRABAHO) bill should be revenue-neutral.
Dominguez, however, thanked the House Committee on Ways and Means for coming out with a substitute to the second comprehensive tax reform program (CTRP) proposal, which aims to modernize fiscal incentives and reduce the corporate income tax rate.
“At least it’s out of the committee, that’s only the first step. We have two more steps,” Dominguez told reporters. “After that it goes to the Senate, and Bicam .”
Under the TRABAHO bill, it seeks to reduce corporate income tax rate by two percentage points annually beginning 2021, and ultimately bring down the current 30 percent to 20 percent by 2029.
TRABAHO, likewise, proposes to rationalize fiscal incentives or remove certain perks. But the consolidated bill kept the present incentives for two years, for investors to have enough time to adjust to the new tax scheme.
The two-year adjustment window, based on the Department of Finance’s (DOF) estimates, would result in P62 billion in foregone revenues during its first year of implementation.
Asked for his comment on the potential revenue losses due to TRABAHO bill, the finance chief answered “it won’t happen."
“This is the first step, ideas should be discussed. We don’t want to add to the deficit,” Dominguez further said.
Last Wednesday, Budget Secretary Benjamin E. Diokno warned that the House committee approved second tax reform bill has a serious fiscal concern that needs to be reviewed by the lawmakers.
Diokno said that Congress should be open to revisiting the revenue impact of the unnumbered TRABAHO bill, adding an estimated P62 billion in revenue losses is a sizeable amount that warrants reconsideration.
“That is a serious fiscal breach,” Diokno said when asked if the economic team is amenable to second tax reform bill approved by House Committee on Ways and Means. “It could result in higher deficit which we find at this time, we don't what that to happen.”
“It is supposed to be revenue natural. I think it’s a step forward, but we’re not sure if that will stick. We cannot dictate on the House or the Senate on that matter. We will try to convince them to try to make it at least revenue neutral,” he added.
Rep. Dakila Carlo Cua, who chairs the House ways and means committee, said the bill will be called the “TRABAHO bill” because the measure is expected to create jobs, especially in the countryside.
He also expressed hope that the Senate would give the measure a chance as some senators appeared lukewarm on the government’s second tax reform package.