Tax reforms under Senate microscope

Senators are keen to conduct a closer scrutiny of expanded tax impositions submitted for the approval of Congress by the Duterte administration to bankroll its “Build, Build, Build” projects.

Senate Minority Leader Franklin M. Drilon confirmed in a radio interview last Sunday lawmakers are concerned the Palace-endorsed fuel tax-hike proposals will likely trigger inflation and drive up prices of basic commodities.

Asked about the senators’ reservations over the Malacañang tax- reform package, Drilon replied: “In the first place, we cannot approve everything the Palace submits to us hook, line and sinker.”

He said senators, for instance, will need to closely review the Palace plan to increase excise taxes on fuel products, gas and diesel, citing its big impact on prices of prime commodities. “Inflation is the biggest factor that triggers price increases,” Drilon said.

The senator added price hikes affecting basic goods are caused by increased taxes on fuel products, especially diesel, which is used by public transport. “Diesel fuel is also used by fishermen, tricycle drivers and trucks ferrying goods to the markets, that is why we will need to look at its effects on the people.”

Moreover, Drilon said the senators will also look at the Palace plan to increase taxes on sugar products, saying this was not included in the first batch of so-called tax reforms earlier endorsed to Congress by Malacañang. Drilon added the sugar tax hike was only “inserted in the deliberations at the Lower House”.

“In fact, many were surprised when the tax on sugar was introduced”, the senator said, noting it proposes a new P10 sugar tax, in addition to the P6 fuel-tax hike. “We need to look into this because it is one of the reasons that prices of basic necessities will go up.”

The senator added there is a need for deeper scrutiny because initial estimates indicate that prices of prime commodities may go up by 10 percent to 20 percent. “We can’t say for sure yet, but initial estimates showed fuel-tax hike may lead to a 1.5-percent increase in inflation,” said Drilon, adding, “If inflation now is 3.5 percent on the average, it might go up to 5 percent, which means prices of basic commodities will also go up.”

According to Drilon, senators recognize it is time to conduct a “thorough review” of the existing tax system, starting with the “administrative aspect” to find out why taxes collected are deemed insufficient. “What more do we need to do so we won’t have to raise present tax rates,” he said, suggesting adoption of “administrative devices to increase collection without increasing the rates. That is our objective.”

This developed as Sen. Juan Edgardo M. Angara, Senate Ways and Means Committee chairman, assured the senators’ willingness to consider Malacañang’s inputs to the tax reforms version being crafted by lawmakers, even as Angara asserted the new tax law must be “just and progressive”.

But Angara anticipates many questions will be asked by senators when they meet as a Committee of the Whole to tackle the Palace tax package. “There will be many questions on the expenditure side. They want to know where the funding will go and if it is really needed.”

In a separate radio interview, Angara estimated at least 10 senators have expressed “reservations” over the proposed tax rates still being finalized in the tax package.

For instance, he said they intend to increase workers’ take-home pay by adjusting tax-bracket exemptions but the reduced tax collection will be recovered from other sources, like raising gasoline excise under a gradual P3-P2-P1 formula to implement the proposed P6 fuel-tax hike.

“We will strive to improve tax measures and make them less burdensome, while retaining tax exemptions of certain sectors, like cooperatives and self-help sectors,” Angara added, “Even as we spare the lower income bracket from higher tax impositions.”

Senate leaders earlier decided to convene a Committee of the Whole to take over the hearings being conducted by the Ways and Means Committee to enable all senators to participate in the committee level deliberations on the tax measure.

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