THE Department of Finance (DOF) has presented its “refined” proposal on Package 4 of the Comprehensive Tax Reform Program (CTRP) to the Senate.
Under the proposal, the interest income tax will be harmonized at 20 percent, while royalties will be maintained according to the existing tax code until 2027, then harmonized and decreased to 15 percent in 2028.
Dividend income tax will remain unchanged until 2027, then harmonized to 10 percent in 2028.
On the other hand, stock transaction taxes will gradually be reduced annually by 0.1 percent, from 0.6 percent to 0.1 percent in 2028.
Current taxes on financial transactions – Including sales, agreements to sell, memoranda of sales, deliveries, or transfer of shares or certificates of stocks – will be maintained until 2027, then removed in 2028. The same timeline applies to taxes on all bills of exchange or drafts.
Meanwhile, rates on policies of insurance upon property, fidelity bonds, and other insurance policies will gradually be decreased annually by 1 percent, from 12.5 percent to 7.5 percent in 2028.
Taxes on mortgages, pledges, and deeds of trust will stay as is until 2027, after which they will be lowered to 0.3 percent in 2028.
Tax rates on bank checks, drafts, certificates of deposit not bearing interest, and other instruments – as well as taxes on life insurance policies – will remain steady.
Taxes on Philippine Charity Sweepstakes Office (PCSO) tickets, prizes, and other winnings will also be unchanged.
The proposed changes are expected to yield P12.2 billion in revenues from the third quarter of 2024 to 2028, versus the P83 billion foregone revenue from the original version of the bill and the P19.3 billion revenue loss from the House version.
Assistant Secretary Karlo Adriano said the CTRP was proposed during the pandemic when the country’s debt-to-GDP ratio was at about 40 percent.
“During that time, the government has some fiscal space to accommodate some of the losses, but given that we’re already beyond the COVID where our debt-to-GDP ratio is around 60 percent, we have to be mindful of the impact of having revenue-eroding measures,” he explained.
The DOF said it is currently working on finalizing the exemptions, repeal list, and tax administration of the proposed bill.
The Senate is set to form a technical working group (TWG) to discuss the proposed bill beginning next week.
Finance Secretary Ralph Recto earlier said that the DOF has no new tax proposals, but is recalibrating existing priority measures. (ABS-CBN News)
