MANILA (Reuters) - Philippine President Rodrigo Duterte has moved a step closer to securing a crucial source of funding for his massive infrastructure plans after senators approved a tax reform bill.
The Senate passed on Tuesday evening the first of five tax reform packages Duterte is pushing, giving it time to reconcile its version with the proposal the lower house of Congress approved in May, before a recess starts on Dec. 16.
Finance Secretary Carlos Dominguez said the government hopes a final congressional version could be sent to Duterte by December “so the tax reform bill could then be signed into law and implemented as scheduled by January.”
Duterte, who took office 17 months ago, has promised to usher in a “golden age of infrastructure” by raising annual spending on it to 7 percent of gross domestic product from less than 3 percent.
To ensure there are enough resources to fulfill that promise, his economic managers have asked Congress to pass a series of tax measures to boost state coffers and make the tax system fairer and more simple.
The Senate version is expected to raise 100 billion to 130 billion pesos ($2.0 billion-$2.6 billion) for the government in the first year of implementation, according to Senator Sonny Angara who heads its tax committee. The House version is projected to generate 157 billion pesos.
Duterte enjoys a clear majority in the House of Representatives and the Senate. The bill was approved by 17 of the 18 senators who voted.
Like the House version, the Senate bill provides for individuals tax exemptions for those earning 250,000 pesos annually and below.
But it reduces slightly the proposed tax on sugary beverages and retains value-added tax exemptions for items such as low-cost rentals and mass housing.
The Senate’s plan hikes some mining taxes, increases the final tax on foreign currency deposits, raises coal excise taxes and doubles documentary stamp tax rates on documents, instruments, loan agreements and papers.
Michael Wan, a Singapore-based economist at Credit Suisse, said the Senate’s version is slightly more supportive of private consumption because its inflationary impact is lower.
“Difficulty lies in reconciling differences between Senate and House versions in bicameral conference,” Wan said in a note.
Reporting by Karen Lema; Editing by Richard Borsuk