A ranking official of the Department of Finance (DOF) stressed that Package 4 of the proposed tax reform program is primarily intended to fix taxation on the financial and capital markets, and funding the government's “Build, Build, Build” program is only a secondary consideration.
During the hearing of the House of Representatives’ Ways and Means Committee Tuesday, Finance Undersecretary Karl Kendrick Chua explained that this particular tax reform package aims to harmonize rates in the financial and capital system.
He said the reform is targeted to make the tax system “simpler, fairer and more efficient.”
Once the reforms are in place, the government “can leverage this to fund the massive infrastructure needs and also the programs of the private sector,” he said.
“Package 4 is designed to be broadly revenue neutral so the objective is not really to fund the finances of the government but to first fix the tax system so that it can deepen the capital market and indirectly it can create a future revenue stream to fund our priority programs,” he said.
Chua said Package 4 will harmonize capital income taxes to a single rate of 15 percent.
“This will benefit so many poor middle class and ordinary Filipinos whose main savings or investment are the long term time deposits or some of the debt instruments,” he said.
The Finance official also said that this tax reform package will harmonize gross receipt tax on the banking system since it will be pegged at 5 percent instead of various rates “so that it is easier to transact with business.”
Finance officials are also proposing the reduction of transaction taxes like documentary stamp tax of non-life insurance companies, among others, “so that we can promote more insurance as we face more disaster and mitigate them and also remove some of the nuisance documentary stamps and on the secondary trading.”
Also, part of this package is the proposed repeal of about 32 of the 41 special laws that have been granting special rates and exemptions.
“In the end, we hope to reduce all the rates to 80 to just 41 so that we can have a system that is simpler, fairer and more efficient,” he added.