DOF agreed to fully implement attrition law to support tax reforms

To complement the comprehensive tax reform package (CTRP), the Department of Finance (DOF) has agreed to fully implement the Lateral Attrition Law to improve collection efficiency of revenue-generating agencies, Speaker Pantaleon Alvarez said. (Photo: Speaker Pantaleon Alvarez/Facebook)

MANILA—To complement the comprehensive tax reform package (CTRP), the Department of Finance (DOF) has agreed to fully implement the Lateral Attrition Law to improve collection efficiency of revenue-generating agencies, Speaker Pantaleon Alvarez said.

Alvarez, who once had reservations on contentious provisions in the bill, expressed full support to the passage of the CTRP.

Alvarez said he had reached an agreement with the DOF to push for the full implementation of Republic Act 9335, or the lateral attrition law, to address the tax administration inefficiencies of the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC).

“With respect to the collections ng Customs at saka ng BIR, meron na kaming understanding with the Dept. of Finance na we will truly implement yung Attrition Law,” Alvarez said in a press briefing after an all-party caucus on Wednesday.

RA 9335 provides penalties and rewards against officials of the BIR and BOC.

Revenue officials who fall short of their collection targets by at least 7.5 percent would be dismissed from service while those who go beyond expectations would be given incentives, which may include cash.

According to Alvarez, once the DOF has established its revenue collection target for the year, the department would not be allowed to adjust it.

“At saka hindi sila pwedeng magbago ng target — once in-establish na yung target collections for the year hindi na pwedeng mag-adjust. So yung in-establish na target for that year yun na yung magiging basis ngayon doon sa pag-apply natin nung Attrition Law,” Alvarez said.

Alvarez said his concern over the adverse effects of high excise tax on petroleum products has been addressed in the latest configuration of the CTRP.

House ways and means committee vice chairman, Albay Rep. Joey Salceda, said that the increased fuel tax actually targets the rich or top 1 percent of the population whose oil use is equal to the consumption of the lowest 50 percent of Filipinos.

Salceda explained that the effects of the increased fuel tax to the poorer sector of the population will be mitigated through a direct transfer program within a three-year implementation of the staggered increase of excise tax on petroleum products.

The bill has a revenue sharing feature wherein not more than 40 percent of the yearly incremental revenues generated from the proposed petroleum excise tax shall be allocated to fund social benefits programs and granting of fuel vouchers to qualified transport franchise holders.

Salceda said such feature “is one of the most progressive items, most egalitarian items, of the tax reform measure.”

Majority Floor Leader Rodolfo Fariñas said the CTRP bill will reach the House plenary on Monday and will most likely be approved on second reading by Wednesday next week.

Fariñas added the tax reform bill will be approved on third and final reading before the sine die adjournment on May 31 so that it can be transmitted to the Senate.

House Bill 5636, also known as the Tax Reform for Acceleration and Inclusion (TRAIN), seeks to lower personal income tax (PIT) rates while raising excise taxes on certain commodities.

HB 5636 aims to enhance the progressivity of the tax structure through rationalization of the internal revenue system.

Under the bill, workers earning no more than PHP250,000 annually will be exempted from paying personal income taxes.

To compensate for the revenue losses from the lowering of the PIT rates, some of the offsetting measures include increasing excise tax rates on all petroleum products and automobiles; expanding the value added tax (VAT) base by limiting exemptions to raw food and other necessities; introducing excise tax on sugar-sweetened beverages; and improving tax administration measures.

The revenues shall also be allocated for infrastructure, health, education and social protection expenditures.