Modified version to prevent revenue loss
THE Department of Finance (DOF) expects to generate P300 billion in added revenues over the next five years once the proposed Passive Income and Financial Intermediary Taxation Act (PIFITA) is overhauled.
As it now stands, the PIFITA, as proposed by the previous administration, would only lead to revenue loss by focusing on the harmonization of taxes, Finance Secretary Ralph Recto said.
The Marcos administration, however, plans to change the proposed measure into the Government Revenues Optimization through the Wealth Tax Harmonization (GROWTH) bill, with the potential to haul in P300 billion in revenues in the five years to 2030, Recto told reporters over the weekend.
“We do have a deficit, and I still want to plug the deficit so that we don’t have to borrow more,” Recto said.
“Because of this, that’s P300 billion for the next five years. So you could say that’s a new tax. But in my opinion, it won’t affect the masses. It’s not consumption-based, these are financial taxes,” the finance chief emphasized.
Recto has informed Senator Win Gatchalian, chairman of the Committee on Ways and Means, about the new proposal, saying it was a formal written communication between the executive and legislative branches of government.
Recto also plans to raise the percentage of certain taxes, as well as the removal of some exemptions.
“The withholding tax on passive income – today, it’s 20 percent.
There was a suggestion before to reduce that, I’m keeping it at 20 percent, but I’m taking away all the exemptions,” Recto said.
The Foreign Currency Deposit Unit is taxed at 15 percent, but under the proposed measure, it will go up to 20 percent.
“Why should I favor the dollar over the peso? Why should the dollar have lower withholding tax rates than the peso? So just equalize it. No exemptions,” Recto said.
Meanwhile, the capital gains tax, estate tax and donors’ tax,
previously reduced to 6 percent from 20 percent, will see a 10 percent increase. “I think it’s reasonable at 10 percent,” Recto said.
The finance head also noted the excise tax on pick-up trucks is included in the proposed changes, considering the excise tax is a package that will be modified, and an entirely new measure. “We just tweaked it,” he said.
“But having said that, especially on the proposed increase in the capital gains, estate and donors’ tax, there is a sunset provision until 2030. By 2030, it will be reduced to 6 percent again, unless extended by Congress. I leave that to the future Congress,” Recto added.
