AMID concerns that the proposed tax relief package could stoke inflation, the government has assured the public that it would seek to make the measure ‘as fiscally neutral as possible.’
Department of Economy, Planning, and Development (DepDev) Secretary Arsenio M. Balisacan explained that the proposed comprehensive tax reform package, dubbed the ‘Progress Bill,’ could only add to inflationary pressures if the increase in purchasing power is not accompanied by measures to expand the supply of goods and services.
‘We will look for offsetting revenue measures because there will be foregone revenues as a result of that. That will be part of the measures to make it as fiscally neutral as possible,’ Balisacan told reporters in a recent interview.
Balisacan said the government is also working to strengthen the supply side of the economy by improving competitiveness and productive capacity, particularly by addressing bottlenecks in agriculture, logistics and energy.
Under the Promoting Growth, Revenue, Equity toward Socio-economic Sustainability (Progress) Bill, individuals earning no more than P350,000 annually would be exempt from personal income tax, raising the tax-free threshold from the current P250,000.
The second and third brackets would also see adjustments, with individuals earning between P350,000 and P450,000 paying 15 percent of the excess over P350,000. Those earning between P450,000 and P800,000 would also face a reduced fixed base tax of P15,000 plus 20 percent of the excess over P450,000.
The proposed package would also exempt qualified small businesses from corporate income tax and grant amnesty on unpaid income, estate, donor’s and value-added taxes, including related penalties and fees.
Earlier this month, the Department of Finance (DOF) said it would seek congressional approval for higher levies on sweetened beverages, tobacco and alcohol, single-use plastics and wealth to offset an estimated P326.92 billion in revenues that could be foregone due to the proposed tax relief package.
The revenue measures, which include higher taxes on sugar-sweetened beverages, distilled spirits, e-cigarettes and novel tobacco products, as well as new levies on plastic products and higher automobile taxes, are expected to generate up to P518.71 billion from 2027 to 2030.
Balisacan, for his part, said the proposed higher taxes on sweetened beverages and other affected products are unlikely to have a significant impact on overall inflation because these account for only a small share of the average household consumption basket.
‘If you average it across the entire population, the share is quite small,’ he added.