By Filane Mikee Cervantes

Albay Rep. Joey Sarte Salceda (File photo)

MANILA – The House Ways and Means Committee will focus on passing tax measures that are progressive and will make the tax system more efficient, its chairman said on Thursday.

Albay Rep. Joey Sarte Salceda made the commitment in response to the International Monetary Fund (IMF) report on selected issues in the Philippines, particularly suggesting a review of the changes on the taxation of passenger vehicles currently based on value.

Salceda said the House tax panel will consider “avoidable or substitutable consumption” rather than taxing older vehicles such as jeepneys, or other goods and services that the poor “cannot avoid to consume.”

He added that the committee will study but is “indisposed” to the IMF recommendation to “shift away from the luxury-based system of taxing automobiles,” and toward an emissions-based system.

“I can’t justify taxing a low-emission luxury car at a lower rate than a public utility jeepney – especially during elevated inflation and the return of face-to-face engagements,” Salceda said. “I can’t justify that to the Filipino commuter, or to the PUJ driver, who was impoverished by the Covid-19 restrictions on travel.”

He suggested updating the rates of motor vehicle users taxes based on gross vehicle weight, since it also accounts for the externality that is road damage and congestion.

“At the same time, to address environmental concerns without burdening the poor, I insist on significant earmarking towards direct subsidies for purchasing new units of cleaner jeepneys,” he added.

He, however, agreed with the IMF that further reforms could be explored in excise tax collections and broadening the value-added tax (VAT) base.

In this regard, he said getting rid of the de minimis for VAT and duty-free importation should be explored, as these are suspected to be the bigger sources of technical smuggling.

Salceda also agreed with the IMF report’s recommendation to focus on measures with higher revenue gains.

The IMF report suggested that “any reform should exclude policies that are difficult to implement and administer, or that have a negligible revenue impact.”

“We agree with that. Congress has limited session time, and as with any tax, the administration also has a budget for its political capital,” he said.

He noted that the personal income tax reduction scheduled under the Tax Reform for Acceleration and Inclusion Law, which would result “in a tax reduction of around 5 percent of income for those affected,” should be coupled with the enactment of the Ease of Paying Taxes Act.

“Low income taxes should be coupled with higher tax collection efficiency. The crucial link is easier tax compliance. Even if we lower rates, if compliance is still difficult, taxpayers will not comply faithfully,” he said. “So, to mitigate the revenue reduction resulting from the scheduled PIT cuts, we need more taxpayers happily complying with their taxes.”

He is expecting for the proposed Ease of Paying Taxes Act to be signed into law by the second quarter of 2023. (PNA)