DOF sees P11B more revenues from bill reducing tax rates on savings, cutting incentives for GOCCs

Package 4 of the government's Comprehensive Tax Reform Program (CTRP) will bring in P11.9 billion worth of additional revenues for the government by removing incentives for some institutions and reducing tax rates on interest income from regular savings, the Department of Finance said Wednesday.

According to the DOF, the proposed Passive Income and Financial Intermediary Taxation Act (PIFITA) will cut incentives for government-owned and -controlled corporations (GOCCs) and state-run financial institutions (GFIs), among others, by repealing 33 laws.

Undersecretary Karl Kendrick Chua said this during the first Senate hearing on the PIFITA before the Senate Committee on Ways and Means.

The PIFITA also cuts the tax rates on interest income from regular savings and short term deposits from the current 20% to 15%. It also decreases the tax rates on interest income from foreign currency deposits and long-term deposits to 15%.

Dividend income tax, on the other hand, will be fixed at 15% except for inter-corporate bonds.

“[In scrapping incentives] for all the special laws and special exemption, our estimate is P11.3 billion [additional revenues],” Chua said upon questioning of Senate Minority Leader Franklin Drilon.

The existing 33 laws granting incentives that the DOF wants repealed covers the following sectors:

• GOCCs
• government financial institutions
• retirement and savings
• property and housing
• power and water
• agriculture
• cooperatives and basic sectors
• Overseas Filipino Workers
• non-banking
• banking and
• special purpose vehicles

Drilon was receptive to the DOF’s proposal, saying that it would be a sound plan to keep the GOCCs in check.

Of the 33 laws that the DOF wants repealed, eight of them concern the GOCCs.

“This is a good opportunity for us. Because apart from the [tax] exemption, they [GOCCs] are also given subsidy,” Drilon said.

“If we remove these Exemption, we will really see what kind of subsidy they are getting rather than the unseen subsidy through tax exemption,” Drilon added. — BM, GMA News