Philippine House Committee to Scrutinize Tax Proposals, Prioritizing Impact on Lower-Income Citizens

The House of Representatives Committee on Ways and Means will subject the Department of Finance’s (DoF) proposed tax package to a “fine-tooth comb” review, its chairman said on Wednesday, prioritizing a more progressive tax system. Marikina Rep. Romero “Miro” S. Quimbo said compensatory measures are needed to offset revenue losses from income tax reforms, but warned against imposing taxes that could negate the benefits of lower income taxes by raising the prices of goods commonly consumed by lower-income Filipinos. “Naturally, we need compensatory measures to offset the revenue loss from income tax reform,” Mr. Quimbo said in a Viber message. “However, what we must avoid is imposing new taxes that would dilute the very benefits of income tax reforms or worse, simply transfer the burden to the poor through higher prices of goods they regularly consume.” While acknowledging the rationale behind some of the proposed revenue measures, he said lawmakers would carefully assess their impact not only on government revenues but also on household budgets. He cited the proposal to increase excise taxes on sweetened beverages, noting that products such as 3-in-1 coffee have become a staple in many Filipino households. “We may end up giving tax relief to a middle-income worker while shifting the burden to lower-income households through higher consumer prices,” Mr. Quimbo told BusinessWorld. He said lawmakers also want to adopt a more risk-based approach to excise taxation, with products posing greater public health risks facing stronger tax measures. “The greater the harm a product poses to public health, the stronger the case for imposing higher excise taxes,” he said. At the same time, Mr. Quimbo said the committee would consider the broader economic consequences of the proposals, including their potential impact on industries that provide employment. “Stricter taxes or regulations on sugar-based products will affect the sugar industry, where many Filipinos depend on their livelihoods,” he said. “These are the competing considerations that Congress must carefully balance as we pursue both tax relief and fiscal responsibility.” As deliberations move forward, the committee will validate the DoF’s revenue projections using data from the Philippine Statistics Authority and seek independent assessments from the Department of Health, health experts, advocacy groups and other stakeholders, he said. The committee also seeks to hear from affected industries, workers, and consumers before making recommendations. Mr. Quimbo said the panel’s review would focus on ensuring that changes to the tax code make the system more equitable. The DoF earlier proposed increasing excise taxes on sweetened beverages, tobacco products, plastic products, luxury vehicles, private aircraft and private sea vessels to offset expected revenue losses from its proposal to raise the annual income tax-exempt threshold to P350,000 from P250,000. John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies, said pairing income tax cuts with excise taxes on products associated with health, environmental or luxury costs could help preserve revenues and make the tax system more progressive, provided the measures are properly designed. “It is broadly reasonable because it pairs personal income tax relief with excise taxes on products that create health, environmental, or luxury-related costs,” Mr. Rivera told BusinessWorld in a Viber message. “This can preserve revenues while making the tax system more progressive.” He said the design of the proposed excise tax increases would be crucial. “Taxes on tobacco, luxury goods and plastics are easier to justify on equity grounds, while sweetened beverage taxes require careful calibration because lower-income households may also bear part of the burden,” he said. Mr. Rivera noted that proposals to increase excise taxes on sweetened beverages and single-use plastics have already been part of the government’s broader fiscal reform agenda. Despite concerns over their distributional impact, he said the overall package could still benefit taxpayers if the income tax relief meaningfully boosts workers’ take-home pay and the excise tax increases are implemented in a targeted and gradual manner. He added that the government should protect vulnerable households from excessive price increases and ensure that additional revenues are channeled to education, healthcare, social protection and other productive sectors.