JUST a few weeks ago, we discussed House Bill (HB) 8083, or the Tax Reform for Attracting Better and High-quality Opportunities (Trabaho) bill, which the House of Representatives approved on third and final reading on September 10. The Trabaho bill is the second phase of Republic Act (RA) 10963, or the Tax Reform for Acceleration and Inclusion (Train) Act. The first phase of RA 10963 — Train 1 — reduced income tax rates for individuals, but also imposed new excise taxes on diesel, liquefied petroleum gas, kerosene and bunker fuel.

The Trabaho bill aims to reduce the corporate income tax rate from 30 percent to 20 percent, and proposes to remove fiscal tax incentives currently enjoyed by companies registered under the Special Economic Zone Act of 1995, RA 7915 and other related laws. Since its approval at the House, several sectors have voiced their displeasure over the bill. In the news, several companies in the Subic Bay Freeport Zone are apparently considering pulling out their investments.

Quite recently, social media sites have been abuzz about how people are up in arms on the fact that, apparently, the Trabaho bill will remove the tax exemptions currently enjoyed by books: exemption of book sales from value-added tax (VAT) and of book imports from customs duties and taxes.

Hoping to quell the uproar against the bill, the Department of Finance (DoF), through Undersecretary Karl Kendrick Chua, issued the following statement on September 25: “The DoF has assured the public that the purchase and importation of books will remain tax-exempt under the second tax reform package of the Duterte administration.”

Mr. Chua also clarified that “the importation of books will also remain tax exempt, as stated under the Customs Modernization and Tariff Act.”

Now that die-hard Harry Potter and Game of Thrones fans can heave a collective sigh of relief, what caused this issue to spiral out of control? What is certain is that the Trabaho bill aims to repeal certain fiscal incentives currently being enjoyed by book publishers, as provided by RA 8047, or the Book Publishing Industry Development Act, specifically income tax holidays (ITH) and zero or lesser customs duties on imports of equipment or raw materials. Many have assumed, as social media posts will show, that repealing fiscal incentives under RA 8047 will result in the imposition of VAT and customs duties on the sale and importation of books.

To this, Chua was quick to assure the public: “First, under the tax code, the exemption of the purchase of books, we did not touch that. If you buy a book from a bookstore, it will still be VAT-exempt. Second, the importation exemption under the Customs Modernization and Tariff Act, we also did not touch that.”

Notwithstanding the repeal of the fiscal incentives enjoyed under RA 8047, the DoF’s plan is to include book publishers in the administration’s Strategic Investment Priorities Plan (Sipp), where they can continue to enjoy tax incentives like the ITH and exemption from customs duties.

“In my view, this is among the sectors that has a great chance of being included in the SIPP,” Chua said.

The move to include book publishers under the “Sipp” is an excellent plan. But it is still a plan. If not included under the “Sipp,” is it not that book publishers, including those that publish textbooks, would most likely increase book prices to recoup the tax incentives that they lost? Just a thought, but a scary one, at that.

Manila Times Source

ATTY. PEACHES ARANAS

Managing Partner LMA LAW