During Monday's plenary session, the chamber approved House Bill 8645 titled "Passive Income and Financial Intermediary Taxation Act of 2019” with 190 affirmative votes, seven negative votes, and no abstention.
The bill aims to make the tax system for capital income and financial intermediation simpler, fairer, more efficient, and regionally more competitive.
Under the measure, interests, dividends, and capital gains will be levied with a unified income tax rate of 15 percent.
House ways and means committee chair, Nueva Ecija Rep. Estrellita Suansing, sponsor of the measure, said pre-need, pension, and life insurance will be levied a uniform 2 percent, while various "nuisance" documentary stamp taxes will be removed.
Suansing also noted that passive income rates will be reduced by half.
"Ultimately, the poor and the middle class will enjoy a net gain. Tax on savings will go down from 20 percent to 15 percent, providing a tax savings of PHP50 to PHP113.50 for savings and investments, ranging from PHP35,000 to PHP100,000. Meanwhile, the rich who invest in dividends will pay 5 percent more in taxes. However, the losses will only be minimal, at less than PHP200 per PHP55,000," Suansing said in her sponsorship speech.
Suansing said the measure aims to improve equity among investors and savers, minimize arbitrage opportunity through a single rate of gross receipt tax on all insurance businesses, and removal of distinction between lending and non-lending activities and term of maturity.
"The approval of this bill provides a window of opportunity to achieve the much-needed reform in the financial sector. The taxation of the financial system should indeed be viewed as a major component of these reforms, an ingredient that could fuel and direct the movement of capital rightly to where they are most needed, so that higher, sustainable, and more inclusive growth can be achieved," she said.