Revenue loss due to PIFITA may hit P126 B

The government may have to forgo P126 billion in revenues over the next five years from the remaining tax reform package that seeks to simplify the tax system.

-  LOUISE MAUREEN SIMEON

During the Senate committee on ways and means hearing yesterday, the Department of Finance (DOF) said the Passive Income and Financial Intermediary Taxation Act (PIFITA) could result in revenue losses of up to P125.9 billion from 2025 to 2029.

"This is an annual average of P21 billion in losses, but we did not include any assumption on behavioral changes," Finance Assistant Secretary Karlo Adriano said.

As the fourth and last tax reform package introduced by the Duterte administration, PIFITA aims to make financial sector taxation simpler, fairer, more efficient and regionally more competitive.

It also aims to make general tax compliance easier and taxation equitable to ensure progressivity, boost tax efforts and increase tax trust.

However, in the immediate future, there will be revenue losses such as from the tax on passive income of P5.4 billion by next year to as much as P49.1 billion by 2029, for a total of P143.4 billion.

Documentary stamp tax (DST) on financial transactions will also decline by P10.3 billion in 2025 and up to P19.9 billion in 2029 for a total of P80.3 billion.

It will be slightly offset by increases in the tax on financial intermediaries, from P6.9 billion in 2025 to P12.3 billion in 2029 for an aggregate additional of P49.4 billion.

The removal of tax exemption on pickup trucks could also provide up to P42.6 billion in additional revenues for the government.