The Department of Finance (DOF) has stated that the expected revenue from the "refined" five tax reform proposals will fall short of the initial projections made by the agency.

Finance Secretary Ralph G. Recto said late Friday, Jan. 26, that the projected revenue gain of P213 billion from the current priority tax measures pending Congress is lower than the original estimate.

The DOF's priority measures cover the Value-added Tax (VAT) on Digital Service Providers (DSP), the Imposition of Excise Tax on Single-use Plastics (SUPs), and Package 4 of the Comprehensive Tax Reform Program (CTRP).

They also include the Rationalization of the Mining Fiscal Regime and the Reform on the Motor Vehicle Users’ Charge (MVUC).

Recto said the decrease stemmed from the MVUC and PIFITA.

“They will be lower,” Recto told reporters. “Particularly the MVUC, that’s one. The PIFITA, the revenue gains, we will front load, [while] the revenue losses, we will backlog.”

“All the others will be probably be the same like the mining tax, single use plastic, the VAT on the digital services for non-residence corporations, more or less the same,” he added.

However, the finance chief did not disclose the actual decrease in revenue resulting from the refinement of the two tax measures.

Last Friday, Recto said the DOF will continue to push for the passage of five pending priority tax measures of the Marcos administration in the absence of new tax proposals.

According to Recto, the recalibrated tax measures, which the DOF aims to all pass within the year, are "fairer, easier to collect, and more practical.”

The VAT on DSP seeks to level the playing field between local and foreign DSPs by clarifying that services provided by the latter in the country are subject to VAT.  

The DOF said the reform will lead to equitable tax treatment and fair competition between foreign and local DSPs and is expected to bring in a total of P83.8 billion in revenues from 2024 to 2028.

Meanwhile, Package 4 seeks to encourage growth in key financial markets by simplifying the tax structure on passive income, and on certain instruments and other financial products. 

Recto said that under the refined Package 4 proposal, the DOF seeks to maintain the structure of some products and instruments while deferring the implementation of certain provisions by 2028 or when the government will have been in a better fiscal position.

The measure would bring in an estimated additional PHP 12.2 billion in revenues from 2024 to 2028.

The DOF also seeks to curb the high volume of mismanaged plastics by imposing an excise tax on certain SUPs. The measure is expected to generate a total of P33.9 billion in revenues from 2024 to 2028.

The rationalization of the Mining Fiscal Regime, on the other hand, aims to introduce a new fiscal regime that encourages growth in the sector while ensuring that the government still gets its fair share of the profits from mining activities. 

The proposal will generate P47 billion in incremental revenues from 2024 to 2028.

Finally, the DOF has enhanced its MVUC proposal to consider the impact of the new rates on inflation, particularly in the transportation and logistics sectors. Given the revised MVUC, the reform will generate P36 billion from 2024 to 2028.

“Considering these reforms altogether, we expect total revenues to grow from 15.5 percent of GDP [gross domestic product] in 2024 to 16.8 percent of GDP in 2028,” Recto said.