Manila passes Bill on major tax reform

Changes hailed by economists, green activists and earn higher credit rating

MANILA • The Philippines has passed a tax reform Bill at the heart of President Rodrigo Duterte's economic agenda, officials said yesterday, raising levies on coal, cars, soft drinks and cosmetic surgery to finance the country's crumbling infrastructure.

Economists and environmentalists have praised the package, with the Philippines winning a credit rating upgrade this week from Fitch Ratings and green campaigners hailing the higher tax on coal.

Officials said the tax reforms, the most significant revenue-boosting measure introduced since Mr Duterte took office last year, would finance increased spending on infrastructure to ease the cost of doing business.

"The tax reform (Act) seeks to achieve a simpler, fairer and more efficient tax system characterised by lower rates and a broader base, to encourage investment, job creation, and poverty reduction," Finance Secretary Carlos Dominguez said in a statement.

The government has warned that bad roads, crowded trains and poor Internet speed have hindered the country's competitiveness and threaten to derail efforts to lift millions out of poverty.

The key provisions of the Bill, which Mr Duterte is expected to sign later this month, include a rise in the excise tax on coal, the fuel that runs almost half the country's power plants. The coal tax will increase incrementally to tenfold or 100 pesos (three Singapore cents) a tonne by 2020, according to the version passed in Congress late Wednesday.

The Act also significantly raises excise taxes on automobiles, petroleum products, including diesel, gasoline and cooking gas, and jacks up mining levies.

REVENUE-BOOSTING MEASURE

The tax reform (Act) seeks to achieve a simpler, fairer, and more efficient tax system characterised by lower rates and a broader base, to encourage investment, job creation, and poverty reduction.

FINANCE SECRETARY CARLOS DOMINGUEZ

The effort to raise revenues also led to a "sweetened beverage tax", an excise tax on "cosmetic procedures, surgery and body enhancements", and the doubling of tax rates on US dollar deposits, capital gains tax and stock transactions.

The affected sectors have warned of an inflation spike but Congress has described the legislation as pro-poor for lowering income tax rates and exempting some small businesses from paying a sales levy.

Mr Duterte has vowed to launch a "golden age of infrastructure", with spending of about US$170 billion (S$230 billion) for roads, railways and airports during his six-year term.

Fitch had earlier cited the impending passage of the tax reforms as one of the reasons behind its decision to upgrade the Philippines' credit rating on Monday.

Congress this week also passed a 3.767 trillion peso national Budget for 2018, a 12.4 per cent increase from last year.

AGENCE FRANCE-PRESSE

A version of this article appeared in the print edition of The Straits Times on December 15, 2017, with the headline 'Manila passes Bill on major tax reform'. Print Edition | Subscribe