(UPDATED) - President Rodrigo Duterte has vetoed six line items of the tax reform law and so-called "rider" provisions in the P3.767-trillion national budget for 2018.
Copies of Republic Act (RA) 10963, or the Tax Reform Acceleration and Inclusion (Train) Act, and RA 10964, or the General Appropriations Act for Fiscal Year 2018, were transmitted to both houses of Congress on December 19 along with the President's direct veto of some items.
Executive Secretary Salvador Medialdea, in a letter accompanying the original copies of both laws, said the President vetoed six line items of the tax reform law.
The law, which amends parts of the National Internal Revenue Code of 1997, brought down the personal income tax rates but increased the excise taxes imposed on petroleum, automobile, tobacco, mining and coal.
The tax reform law provisions that were vetoed are the following:
Malacañang said this provision effectively maintains the special tax rate of 15 percent of gross income for employees of these firms. In line with the Equal Protection Clause of the 1987 Constitution, the employees of these firms should follow the regular tax rates applicable to other individual taxpayers.
The Palace said this provision runs counter to the principle of limiting the value-added tax (VAT) zero-rating to direct exporters. This also grants a new incentive to suppliers of registered tourism enterprises, which may avail of incentives under the Tourism Infrastructure and Enterprise Zone Authority (Tieza) law.
This provision is seen to lead to abuse and leakages, Malacañang said. The taxpayers under this provision are already exempted from VAT and the lower three-percent percentage tax on gross sales or gross receipts "is considered as their fair share in contributing to the revenue base."
This provision is also seen to lead to abuse by taxpayers and massive revenue erosion. "The provision runs the risk of being too general, covering all types of petroleum products," Medialdea wrote.
This provision, which effectively amends the Sin Tax Law, will effectively diminish the share of the health sector in the proposed allocation.
As for the 2018 budget, the President vetoed items that "do not relate to some particular appropriation," as follows:
Monitoring and evaluation expenses deemed necessary may be allowed, but will be subject to budgeting, accounting and auditing laws.
Malacañang noted that government agencies have an inherent authority to assess reasonable fees to recover the cost of rendered services.
Government agencies are expected to spend what is programmed in their appropriations. Any changes should first comply with the requirements under the law.
"The sources of income enumerated have already been included in the Non-Tax Revenue Program for FY 2018, thereby resulting in double programming for the said income sources," Medialdea wrote.
The Palace said Congress will have to approve amendments to the laws and rules affected by the President's veto.
Both measures were signed into law six days before Christmas.
Under the Train law, the first P250,000 annual taxable income or wage earners receiving a monthly salary of almost P21,000 will no longer have to pay income taxes while the tax exemption for 13th month pay and other bonuses has been raised to P90,000.
The Bureau of Internal Revenue earlier said around 6.8 million or 90 percent of the 7.5 million individual income taxpayers will be exempt from paying taxes starting 2018, more than triple than the current two million exempt minimum wage earners. (SunStar Philippines)