Senate’s tax reform measure more supportive of consumption: study

Credit Suisse headquarters as of 2009 (Photo By Jochen Teufel – Own work, CC BY-SA 3.0)

MANILA — The Senate version of the proposed tax reform bill has lesser inflationary impact and is more supportive of domestic consumption, according to Credit Suisse, a global financial service company.

After the Senate approved on third and final reading its tax reform measure Monday night, Credit Suisse said in a report released Tuesday that the Senate version will yield an additional PHP100 billion to PHP130 billion tax-take in its first year of implementation.

While this amount is lower than the PHP175 billion gains from the House version, the Credit Suisse report said the Senate version has lesser impact on inflation.

“(The Senate version is) more supportive of consumption overall,” it said.

In the report, the global financial services giant said it considers the House of Representatives’ version to increase inflation by about 0.

9 percent to 1.2 percent in 2018 because of tax changes.

This is not expected from the Senate version because “fuel excise taxes are back-loaded rather than front-loaded” and “tax increases such as on sugary drinks are lower.”

Credit Suisse also said that “the newly introduced taxes such as documentary stamp tax, mining taxes, and cosmetic procedures are narrow and on specific sectors rather than broad-based” and that exemptions for the value-added tax (VAT) “are kept for items such as low-cost rentals and mass housing in the Senate version.”

“A corollary is that the Senate bill is slightly more supportive of private consumption, with personal income tax cuts front-loaded in one tranche in the Senate bill compared with two tranches in the House version (2018 and 2020), based on latest available information,” it said.

The study, however, cited that even as hurdles in the Senate had surpassed the measure, it still has to gain approval from the Bicameral Conference Committee before it can be submitted to the President.