The final package of the Comprehensive Tax Reform Program (CTRP), which is a legislative priority of President Ferdinand Marcos Jr. during his first State of the Nation Address, was sponsored before the plenary of the House of Representatives recently.
In his sponsorship speech, House Ways and Means chair Representative Joey Salceda said House Bill 4339 would simplify the taxation of passive income, financial services, and transactions by reducing the number of tax rates from 83 to 58.
“That will significantly simplify tax administration and encourage more financial transactions and financial inclusion in the country,” Salceda said.
“If we are able to enact this package as proposed, we will be able to complete the Comprehensive Tax Reform, one of the largest tax reform programs of any country in the world,” the veteran legislator added.
“The country’s tax reform program is a case study for model reforms and best practices at Harvard University.”
The seasoned lawmaker noted that the country’s tax reform program is a case study for model reforms and best practices at Harvard University.
Apart from simplifying tax rates, the measure also harmonizes the interest income tax rates and gradually reduces these from 20 percent to 15 percent.
“This will benefit the small savers or those with savings of less than P15,000, which comprise 79% of the total number of deposit accounts in the country.”
This, he said, will benefit the small savers or those with savings of less than P15,000, which comprise 79 percent of the total number of deposit accounts in the country according to Bangko Sentral ng Pilipinas data on the profile of depositors.
The proposal also seeks to remove the documentary stamp tax (DST) on certificates.
Common employment requirements such as the National Bureau of Investigation (NBI) clearance, birth certificates, diplomas, and transcripts of records will no longer be subject to the DST.
“[F]or ordinary Filipinos, we remove the DST on a host of documents usually required for visas, job applications, and other important day-to-day transactions,” Salceda said.
Documents that will no longer be subject to DST are certificates of profits or interest of property or accumulations; bank checks, drafts, certificates of deposit not bearing interest, and other instruments; bills of exchange or drafts; stamp tax on proxies for voting of any elections; powers of attorney; and certificates, such as diplomas.
For overseas Filipino workers, the bill proposes to remove the 0.3 percent DST on local remittances.
“For example, a remittance worth P5,000 will no longer be charged an additional DST of P15,” he said.
The bill also lowers the tax rate on health maintenance organization (HMO), pension, and pre-need insurance products from a 12 percent VAT to a 2 percent premium tax. The adjustment also harmonizes the rate with the rates on life insurance.
As a “clean-up” of the CTRP, the bill removes the excise tax exemption of pickup trucks introduced under Republic Act 10963, otherwise known as the Tax Reform for Acceleration and Inclusion (TRAIN) law.
This is expected to result in at least P12.4 billion in annual incremental revenues per year.
The bill provides for the repeal of the exemption of foreign currency deposits from interest income tax.
Salceda cited that “it is no longer the policy of the State to attract foreign currency deposits as we now have adequate gross international reserves and are no longer in a dire balance of payment crisis.”