House approves 4th package of tax reform program on 3rd reading

House ways and means committee chair, Rep. Joey Salceda, said there are numerous deficiencies that serve as compelling reasons to undertake tax reform in the financial sector. These deficiencies include complicated tax structure, susceptibility to arbitrage, and inequitable distribution of tax burden. (File Photo: Joey Sarte Salceda/Facebook)

MANILA — The House of Representatives on Monday approved on third and final reading the proposed Passive Income and Financial Intermediary Taxation Act (PIFITA).

With 186 affirmative votes, 6 negative votes, and 2 abstentions, the lower chamber approved House Bill No. 304 or the PIFITA, which encompasses the fourth package of the Duterte Administration’s Comprehensive Tax Reform Program (CTRP).

The bill complements Republic Act 10963 or 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.

House ways and means committee chair, Rep. Joey Salceda, said there are numerous deficiencies that serve as compelling reasons to undertake tax reform in the financial sector. These deficiencies include complicated tax structure, susceptibility to arbitrage, and inequitable distribution of tax burden.

“The inclusion of the capital income and financial services in the current administration’s Comprehensive Tax Reform Program provides a window of opportunity to achieve the much-needed reform in the financial sector,” Salceda said.

The PIFITA particularly aims to provide neutrality in the tax treatment across financial institutions and financial instruments; simplify what has become a complex tax system; improve equity across investors and savers; minimize arbitrage opportunities; and promote capital market development and tax competitiveness within the context of financial globalization, increased mobility, and financial inclusion.

Under the bill, the tax rates on interest income from regular savings and short term deposits shall be decreased from the current 20 percent to 15 percent.

Tax rates on interest income from foreign currency deposits and long-term deposits shall both likewise dip to 15 percent.

Dividend income shall be fixed at 15 percent except for inter-corporate bonds.