Lower House Approves on Final Reading Bill on Financial Services, Passive Income, Transactions Tax Reform

The House of Representatives approved on third and final reading a tax reform bill intended for financial services, passive income, and transactions.

This comes as 258 lawmakers voted in favor of House Bill No. 4339 which aims to amend and repeal multiple sections of the National Internal Revenue Code of 1997, making it simpler.

Meanwhile, three lawmakers voted against the approval of the bill, while no lawmaker abstained from voting.

Among the notable provisions of House Bill No. 4339 include the gradual reduction of tax rates on royalties and interests from the years 2023 to 2027 from 20 percent down to 15 percent.

Moreover, the bill also seeks the imposition of a single tax rate of 5 percent gross receipt tax on banks, quasi-banks, and other non-bank financial intermediaries’ incomes, the imposition of a 2 percent tax premium on life insurance and health maintenance organizations’ products.

The bill also seeks to amend the Duterte-era Tax Reform for Acceleration and Inclusion (TRAIN) law, pushing for the removal of excise tax exemption of pick-up trucks.

Gabriela Partylist Representative Arlene Brosas, one of the lawmakers who voted no to House Bill 4339, explained her stance, saying that it will only result in revenue losses.

“Mr. Speaker, while we take note of TRAIN 4’s intent to simplify and reduce the overall tax rate and bases on many types of passive income from 74 to 52 supposedly to correct arbitrage and unfairness, this proposed TRAIN Package 4 leads to unnecessary and massive revenue losses at a time when we need to retain the level of tax collections from passive income and financial transactions,” Brosas said.

She added that the bill will lead to the advantage of the big players in the financial markets and burden the typical Filipino.

“The bill rests on a very hypothetical assumption that lowering and simplifying tax rates and bases will deepen the country’s capital market and encourage more Filipinos to put their money in bank deposits, pre-need insurance, stocks and other passive income. In reality, big players in the financial markets will emerge as the biggest winners under this measure, not the small percentage of typical Filipino middle class who have savings or who have insurance,” she added. (GFB)