Metro Manila (CNN Philippines, August 27) — Another tax reform bill cleared the House Committee on Ways and Means, this time covering duties on bank deposits and investment products.
The panel approved House Bill 304, or the Passive Income and Financial Intermediary Tax Act (PIFITA), on Tuesday, according to committee chair Albay Rep. Joey Salceda. This is the fourth package of the comprehensive tax reform program put forward by the Department of Finance.
The measure seeks to overhaul the tax scheme for all kinds of passive income, which mostly refer to profits from bank deposits, bond investments, dividends, and shares of stock. It sets a uniform 15 percent tax rate on interest and dividend income, which are currently at 20 percent and 10 percent, respectively.
The government currently collects several taxes on capital income, among them the documentary stamp tax (DST), capital gains tax, and tax on interest income. The rates vary depending on the type of product, currency, maturity, issuer, residency, and business status, which the Department of Finance (DOF) said makes it unfair and complicated.
The measure also seeks to bring down the duty on interest income, which include the tax automatically deducted on the monthly proceeds earned by bank deposits. The DOF said local rates are generally higher compared to the rest of Southeast Asia.
Banks and other financial firms would also have to settle a flat rate 5 percent gross receipts tax if the bill becomes a law, against current rates that range from 1-7 percent.
The tax for insurance and health maintenance organization premiums would also be unified at 2 percent. Meanwhile, non-life insurance deals remain subject to 12 percent value-added tax.
The PIFITA also exempts more transactions from the DST paid for government-issued and other financial transaction papers like baptismal certificates and diplomas. The tax on domestic fund transfers would also be removed.
Other exemptions to the DST include the oath of office required from elected officials, the Good Moral Standing Certificate required by the Professional Regulation Commission, affidavit of loss and other certificates, proxies, and the certificate of no marriage record.
Salceda said the bill would lead to a ₱4.2-billion net revenue loss.
The bill still needs to be approved in two readings by the House plenary, where it will follow package two that changes the corporate income tax structure.
