DOF priority tax measures advance in Congress

Finance Secretary Benjamin E. Diokno has outlined the Department of Finance’s (DOF) priority tax measures for 2024, the majority of which are in advanced stages in Congress.

According to Secretary Diokno, the DOF is actively pushing for the passage of Package 3 or the Real Property Valuation and Assessment Reform (RPVAR), value-added tax (VAT) on non-resident digital service providers (DSPs), and the VAT refund for non-resident tourists.

RPVAR will boost investor confidence in the country through the adoption of internationally accepted valuation standards and the professionalization of real property valuation. The measure aims to improve real property tax collections by updating property valuations without increasing taxes or imposing new taxes.

RPVAR was approved on third reading at the House of Representatives (House Bill 6558) on December 12, 2022. Its counterpart measure in the Senate (Senate Bill 2386) is nearing the end of the period of interpellations and will be ready for amendments.

Meanwhile, the VAT on DSPs seeks to level the playing field between foreign and local digital service providers.

The measure was approved on third reading at the House of Representatives (HB 4122) on November 14, 2022. Its counterpart bill in the Senate is currently being routed for committee members’ approval, and will be presented to the Senate plenary early 2024.

On the other hand, the VAT refund for non-resident tourists provides tourists incentives to stimulate tourism and trade in the country and boost competitiveness among businesses. The Philippines is the only country in Asia that does not have a tourist VAT refund system.

The measure was approved on third reading (HB 7292) at the House of Representatives on March 6, 2023, while its counterpart in the Senate (SB 2415) has already been sponsored by Committee of Ways and Means Chairman Senator Sherwin Gatchalian, and will be up for plenary debates in January 2024.

RPVAR, VAT on DSP, and the VAT refund for non-resident tourists are expected to be passed in the Senate by the first quarter of next year.

The DOF is also pushing for the passage of Package 4 or the Passive Income and Financial Intermediaries Taxation Act (PIFITA), which will harmonize the taxation of passive income and financial intermediaries by reducing and simplifying the complicated tax rates on financial transactions. It will also help boost the competitiveness of capital and financial products by aligning the country’s financial tax regime with regional peers.

The bill was approved on third reading at the House of Representatives (HB 4339) on November 14, 2022. Meanwhile, SBs 900, 1347, 1364, and 1848 will be up for Technical Working Group review of the Senate’s Committee on Ways and Means in the first quarter of 2024.

The motor vehicle road user’s charge (MVUC) or road users tax bill seeks to provide adequate funding for the maintenance of national and provincial roads, as well as address air pollution from motor vehicles.

The measure was approved by the House of Representatives (HB 9647) on second reading on December 5, 2023, while SB 2375 is pending in the Committee on Ways and Means.

Meanwhile, HB 4102 on the imposition of excise taxes on single-use plastics (SUPs) was approved on third reading on November 14, 2022, while SBs 1449 and 1844 are pending in the Senate Committee on Ways and Means.

Secretary Diokno also said that the DOF is supporting the rationalization of the mining fiscal regime, which aims to establish a single and rationalized fiscal regime applicable to all mining agreements while ensuring the sector’s sustainability and the government’s equitable share of mining revenues.

The measure was approved on third reading at the House of Representatives (HB 8937) on September 25, 2023. A new mining fiscal regime is a necessary condition to boost mining in the country.

Apart from these, the DOF is also advocating for the imposition of excise taxes on pre-mixed alcoholic beverages (HB 1810), and sweetened beverages (HB 7485).

To date, the Marcos, Jr. administration has accomplished the passage of the Maharlika Investment Fund (MIF) Act, the Automatic Income Classification of Local Government Units Act, and the Public-Private Partnership (PPP) Code.

The DOF aims to pass the remaining key legislations by 2024 to generate revenues that will support the budget and meet the targets set in the Medium-Term Fiscal Framework.