DOF studies gross taxation

Published October 27, 2019, 12:00 AM

by manilabulletin_admin

By Chino S. Leyco

Despite his apparent objection to gross taxation, Department of Finance (DOF) Chief Carlos G. Dominguez III could not immediately thumb down President Duterte’s wishes to look into this taxation system.

Finance Secretary Carlos G. Dominguez III (DOF photo / Howard Felipe)
Finance Secretary Carlos G. Dominguez III (DOF photo / Howard Felipe)

Dominguez said a group of legal and economic officials will still look into the chief executive’s proposal to compute corporate taxes based on gross revenue rather than taxable net income.

According to Dominguez, the task force, composed of the inter-agency Development Budget Coordination Committee and Department of Justice, needs to consider the unprecedented taxation scheme just because the President mentioned it.

Finance Undersecretary Antonette C. Tionko explained the goal of the task force is to determine the economic impact should the Philippines eventually shift to gross earnings as base for businesses’ income tax.

The result of the study will provide the reasons “why we will or we will not” adopt the gross taxation system, the ranking finance official said.

“Shifting to gross is just a study, it’s a long way to go. First of all, we have to study many things, specifically if it is in accordance with our Constitution. Is it fair? Is it favorable to small businesses or you know, stuff like that,” Tionko told reporters.

But Dominguez clarified that the gross taxation proposal despite being a “priority” for the President will not be included in the Duterte administration’s comprehensive tax reform program (CTRP).

He said President Duterte’s proposal that did not come from the economic team will not affect the remaining CTRP packages, particularly the bill covering the gradual reduction of the corporate income tax rate from 30 percent to 20 percent.

“By the way, nobody does it (gross taxation),” Dominguez disclosed. Asked who suggested the gross taxation scheme to the President, he said “I have no idea. I really don’t know. In fact, I asked [Senator] Bong Go. He didn’t know, too.”

In September, President Duterte floated the idea of adopting gross taxation system in the country over net tax collection to clip the rampant corruption in the government, particularly in the Bureau of Internal Revenue.

According to President Duterte, gross taxation is a system being used in Hong Kong, Singapore, and Japan.

But as early as now, Albay Second District Rep. Clemente Joey S. Salceda, who chairs the House ways and means committee, fiercely opposed the gross taxation proposal, noting it will not be good for low margin businesses.

“We just have to have structural approach rather than shifting to gross income taxation because it is grossly inequitable actually,” Salceda said. “The current one, it’s working. Let’s just make it better. Just put good people there.”

In the Philippines, corporate earnings were levied after all expenses have been deducted from sales.