Manila: The Department of Finance (DOF) is proposing several tax reform measures that aim to generate over PHP190 billion to counteract the revenue losses resulting from the proposed tax relief initiatives.
According to Philippines News Agency, during a recent briefing, DOF Undersecretary for Fiscal Policy and Monitoring Group Karlo Fermin Adriano outlined that these measures, along with higher income tax and minimum corporate income tax exemptions for micro and small enterprises, form part of the Promoting Growth, Revenue, and Equity towards Socio-Economic Sustainability (ProGRESS) proposal. This initiative seeks to maintain a fair and equitable tax system and ensure the welfare of Filipinos, providing tax relief to approximately 3.13 million taxpayers, most of whom fall within the lower mid to middle income bracket, and 78,000 micro and small enterprises, while imposing taxes on wealth to promote a sustainable economy.
The ProGRESS proposal includes increasing the personal income tax exemption from PHP250,000 to PHP350,000 and exempting micro and small enterprises from the minimum corporate income tax. Despite these exemptions benefiting many Filipinos, DOF estimates indicate potential revenue losses of PHP5.96 billion from the minimum corporate income tax exemption and PHP61.06 billion from the higher personal income tax exemption.
To mitigate these losses, the DOF is advocating for a rise in the sweetened beverage tax to PHP20 per liter for sugar and PHP40 per liter for high-fructose corn syrup. Additionally, there is a proposal for a unified excise tax rate of PHP72.90 on e-cigarettes starting in 2027, with a 5 percent indexation beginning in 2028, alongside an additional excise tax on e-cigarette devices and the taxation of novel tobacco products.
Adriano also mentioned a proposed update on the alcohol excise tax and the motor vehicle users' charge. Furthermore, to address the issue of plastic waste, the DOF plans to impose an excise tax on plastics at PHP150 per kilogram, with an annual indexation of 5 percent.
The DOF's tax reform measures are projected to generate PHP518.71 billion from 2027 to 2030, exceeding the estimated PHP326.92 billion losses from the tax relief measures, resulting in a net revenue gain of PHP191.77 billion. Breakdown of these revenues includes PHP296.97 billion from sweetened beverage taxes, PHP33.06 billion from excise taxes on cigarettes and novel tobacco, PHP31.26 billion from alcohol excise tax, PHP52.19 billion from plastic taxes, PHP15.64 billion from automobile taxes, and PHP89.58 billion from motor vehicle users' charges.
Adriano emphasized the timeliness of ProGRESS as a response to calls from stakeholders, including legislators, for meaningful tax or fiscal relief for the middle-income classes. The proposed measures aim to support this group, which often pays significant taxes without qualifying for financial assistance or enjoying a comfortable lifestyle. Adriano expressed hope that the proposed measures will be enacted into law within the year and announced plans for nationwide consultations to inform stakeholders about the proposals.
