Philippine finance chief bucks VAT hike proposal

Separately, the Senate leadership is supportive of the economic managers’ proposal to make tax evasion a predicate crime to money laundering and ease the bank secrecy law for taxation purposes, Senate President Aquilino “Koko” Pimentel III told reporters on the side-lines of the 112th anniversary of the Internal Revenue Bureau.
In a speech, Dominguez said he was “inclined against” the proposal to raise VAT to 14 per cent from 12 per cent at present to offset the foregone revenues to result from President Duterte’s promise to bring down the personal and corporate income tax rates, which were among the highest in the region.
“By some estimates we could double VAT collections simply by being more efficient in collecting it,” he said.
Finance Department estimates showed an estimated 82 billion peso (Bt61 billion) gain if the VAT rate is increased to 14 per cent.
The department plans to submit for Congress’ consideration a “revenue-positive” comprehensive tax reform package next month.
Pimentel said the Senate plans to pass a comprehensive tax reform bill within a year for it to take effect by 2018.
“Tax reform has been promised by President Duterte and Congress is ready with the data and with the arguments in its favour, so we will prioritise it.”
The Senate also supported the department’s pitch to relax the country’s strict bank secrecy law and make tax evasion a predicate crime to money laundering, he said.
The Philippines is one of only three countries in the world where there remains a bank secrecy law as well as one of just two countries under whose anti-money laundering law tax evasion is not a predicate crime.

Levy on soft drink
Budget Secretary Benjamin Diokno earlier said the comprehensive tax reform package would also include increasing the levy on soft drink and petroleum products as well as rationalising the tax perks being given away to investors.
Dominguez had said that “now is the time” to raise the excise tax slapped on oil products, whose rates have remained low and unadjusted for inflation for almost two decades.
The department’s proposal also sought the indexation of excise tax rates by 4 per cent every year, although the government should provide a subsidy when crude oil prices pass $90 a barrel.
An economics working paper published by Manila-based multilateral lender Asian Development Bank (ADB) last month titled “Determinants of Consumer Price Inflation versus Producer Price Inflation in Asia” noted that “for the Philippines and Singapore, the pass-through to producers and consumers did not increase during the recent global oil price decline”.
“This could reflect no significant adjustments in policy measures relating to energy and energy-related sectors and more or less stable oil use intensity and energy efficiency,” read the paper authored by ADB principal economist Donghyun Park as well as Thammasat University Asst Professor Juthathip Jongwanich and lecturer Petchtharin Wongcharoen.