The Department of Finance (DOF) remains optimistic that the Congress will pass in 2022 the remaining tax reform packages of the Duterte administration that aim to reform the property valuation system and simplify capital market taxation, after the legislature was able to act on a slew of Palace-endorsed economic liberalization bills in 2021 amid the pandemic.

Finance Secretary Carlos Dominguez III said the approval on third reading of the DOF-supported amendment proposals to the Public Service Act (PSA), Foreign Investments Act (FIA) and the Retail Trade Liberalization Act (RTLA) by both houses of Congress in 2021 bode well for the approval of the remaining tax reform packages.

Real property valuation reform, or Package 3 of President Duterte’s Comprehensive Tax Reform Program (CTRP), was already passed by the House of Representatives back in November 2019, but remains pending at the committee level in the Senate as of December 2021.

Package 3 aims to develop an equitable and efficient real property valuation system while broadening the tax base used for property-related taxes of the national and local governments.

Reforming the property valuation system to make it on par with global standards and shielding it from political influence will help local government units (LGUs) raise more revenues without increasing the existing tax rates or imposing new taxes, the DOF said.

Package 3 seeks to establish a single valuation base for taxation through the adoption by LGUs of updated schedules of market values (SMVs), and recentralize the approval of these SMVs by the local legislatures back to the Secretary of Finance, with review by the Bureau of Local Government Finance (BLGF), in coordination with the Bureau of Internal Revenue (BIR), among other reforms under the proposed measure.

Over the last three years, only 62 percent of Revenue District Offices (RDOs) under the Bureau of Internal Revenue (BIR) have updated their zonal values, according to DOF data as of April 2021.

As of the same period, only 40 percent of LGUs, mainly provinces and cities, have updated the SMVs.

Apart from outdated valuation, having various agencies doing or requiring property valuation, with each agency using its own system and methodology for valuation also complicates the situation, the DOF said.

The Passive Income and Financial Intermediary Taxation Act (PIFITA) or Package 4 of the CTRP, meanwhile, complements the implementation of the Tax Reform for Acceleration and Inclusion (TRAIN) Act by making passive income and financial intermediary taxes simpler, fairer, more efficient, and more regionally competitive.

This last package under the CTRP will reduce the number of differing tax rates from 80 to 36 and harmonize the tax rates on interest, dividends and capital gains, and the business taxes imposed on financial intermediaries.

Package 4 will likewise remove the documentary stamp tax (DST) imposed on non-monetary transactions, the DOF said.

With Package 4 reform, the Philippines can be more competitive in attracting capital and investments that are urgently needed to finance large-scale infrastructure, including the ‘Build, Build, Build’ program, create more and better jobs, and boost economic growth, the DOF added.

The House has also approved its version of this reform package, which remains pending at the committee level of the Senate.

Dominguez thanked the Senate and the House for passing the necessary amendments to the PSA and the FIA; and the amendments to the RTLA, which was signed into law by President Duterte as Republic Act (RA) 11595.

These three economic liberalization bills are necessary to further open the economy to foreign investors in order to help secure the country’s fiscal stability and strengthen its recovery from the pandemic, Dominguez said.

Dominguez said the DOF will also continue to engage with the Congress in passing the proposed Capital Market Development Act (CMDA), which aims to further deepen the domestic capital markets by building a sustainable corporate pension system for Filipino workers.

“This set of reforms complements the other game-changing measures already in place to keep the economy back on the path of high growth,” he said earlier.

These other game-changing measures include the Financial Institutions Strategic Transfer (FIST) Act, which will allow banks to unload non-performing loans and assets to strengthen their lending capacity; and the Corporate Recovery and Tax Incentives for Enterprises Act (CREATE), which will not only leave more cash resources for firms to sustain employment or use for investments, but will also position them to be more regionally competitive and attractive to foreign capital infusion through a rationalized fiscal incentives system.

Over the six-year term of President Duterte, the DOF has worked closely with Congress in the passage of the various packages of the CTRP, which include TRAIN, the salary earner-friendly measure that substantially lowered income taxes for 99 percent of Filipino taxpayers.

TRAIN enabled most taxpayers to have tax savings—equivalent to many of them to another full-month pay—and increase their purchasing power, which in turn helped to further stimulate the economy during the pre-pandemic period.

The other CTRP packages pushed by the DOF and passed by Congress were CREATE; the tax amnesty law; and the “sin” tax reform laws that further increased taxes on alcoholic beverages and tobacco products, including e-cigarettes.

Dominguez said that in the homestretch of the Duterte presidency, the government remains fully determined to rapidly modernize governance; pursue market-friendly reforms; and continue public investments—especially in infrastructure, education, and healthcare—to guarantee a strong economic rebound.

In the face of the unprecedented crisis brought about by the pandemic, the Duterte administration will continue to work hard until the very last minute of its term to “ensure a legacy of a dynamic and market-driven economy for the Filipino people,” he said.

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