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REPUBLIC OF THE PHILIPPINES
Pasay City
Journal
SESSION NO. 28
Tuesday, October 3, 2017
SEVENTEENTH CONGRESS
SECOND REGULAR SESSION

SESSION NO. 28
Tuesday, October 3, 2017
CALL TO OW)ER
At 3:16 p.m., the Senate President, Hon. Aquilino
“Koko” Pimentel III, called the session to order.
PRAYER
Sen. Ralph G. Recto led the prayer, to wit:
Lord, we ask for Your presence in our
midst, as we meet during this crucial period
in our history. Help us respond to the cry of
our people for effective leadership, for better
services, and for integrity and compassion.
Eternal God, with bowed heads we come
together seeking Your strength, imploring
Your guidance, and praying for Your bene
volence for the benefit of our people and of
our great nation.
We are grateful for the many manifesta
tions of Your devotion for our well-being
beyond what we deserve. May we find
every occasion to use all these blessings for
Your honor and glory.
Lord, grant us an open mind and a kind
heart to allow us to listen closely, recognize
what is true and most urgent, and make
decisions that will change the lives of our
people.
Grant us with the gift of reason and
understanding, and of tolerance and gene
rosity that we may serve our country with
more dedication and magnanimity.
Amen.
ROLL CALL
Upon direction of the Senate President, the
Secretary of the Senate, Atty. Lutgardo B. Barbo,
called the roll, to which the following senators
responded:
Angara, S.
Aquino, P. B. IV B.
Binay, M. L. N. S.
Drilon, F. M.
Ejercito, J. V. G.
Gatchalian, W.
Gordon, R. J.
Honasan, G. B.
Hontiveros, R.
Lacson, P. M.
Legarda, L.
Pacquiao, E. M. D
Pangilinan, F. N.
Pimentel III, A. K.
Poe, G.
Recto, R. G.
Sotto III, V. C.
Villanueva, J.
Villar, C. A.
Zubiri, J. M. F

522 TUESDAY, OCTOBER 3, 2017
With 20 senators present, the Chair declared
the presence of a quorum.
Senators Escudero and Trillanes arrived after
the roll call.
Senator De Lima was unable to attend the
session as she was under detention.
SUSPENSION OF SESSION
With the permission of the Body, the session was
suspended.
It was 3:18 p.m.
RESUMPTION OF SESSION
At 3:19 p.m., the session was resumed with
Senate President Pro Tempore Recto presiding.
APPROVAL OF THE JOURNAL
Upon motion of Senator Sotto, there being no
objection, the Body dispensed with the reading of the
Journal of Session No. 27 (October 2, 2017) and
considered it approved.
REFERENCE OF BUSINESS
The Secretary of the Senate read the following
matters and the Chair made the corresponding
referrals:
BILL ON FIRST READING
Senate No. 1596, entitled
AN ACT DECLARING NOVEMBER 8
OF EVERY YEAR A SPECIAL
NONWORKING PUBLIC HOLIDAY
IN THE EASTERN VISAYAS REGION
TO BE KNOWN AS THE YOLANDA
COMMEMORATION DAY
Introduced by Senator Sonny Angara
To the Committee on Rules
RESOLUTIONS
Proposed Senate Resolution No. 520, entitled
RESOLUTION DIRECTING THE PROPER
SENATE COMMITTEES TO CON
DUCT AN INQUIRY, IN AID OF
LEGISLATION, ON THE RISE OF
PREMATURE OR PRETERM
BIRTHS IN THE COUNTRY
Introduced by Senator Maria Lourdes Nancy
S. Binay
To the Committee on Health and Demo
graphy
Proposed Senate Resolution No. 521, entitled
RESOLUTION DIRECTING THE PROPER
SENATE COMMITTEES TO INVES
TIGATE, IN AID OF LEGISLATION,
THE FIFTY (50) PESOS ADDHIONAL
CHARGE FOR PAPER BILLING OF
TELECOMMUNICATIONS COM
PANIES
Introduced by Senator Maria Lourdes Nancy
S. Binay
To the Committees on Trade, Commerce
and Entrepreneurship; and Public Services
COMMUNICATIONS
Letters from the Bangko Sentral ng Pilipinas,
transmitting to the Senate copies of the following
certified and authenticated BSP issuances, in
compliance with Section 15(a) of Republic Act
No. 7653 (The New Central Bank Act):
Circular Letter No. CL-2017-053 and 054
dated 30 June, and 15 September 2017;
and
Memorandum No. M-2017-027 and 028 both
dated 11 September 2017.
To the Committee on Banks, Financial
Institutions and Currencies
Letter from the Supreme Court, transmitting to the
Senate a copy of the Judiciary Annual Report
2016-June 2017, pursuant to Article VIII,
Section 16 of the 1987 Constitution.
To the Committee on Jiistiee and Human
Rights
r

TUESDAY, OCTOBER 3, 2017 523
Letter from the Philippine Charity Sweepstakes
Office, submitting to the Senate a copy of its
2016 p e s o Annual Report.
To the Committee on Government Corpo
ration and Public Enterprises
COMMITTEE REPORT
Committee Report No. 166, prepared and submitted
jointly by the Committees on Education, Arts
and Culture; Public Services; and Ways and
Means, on Senate Bill No. 1597 with Senators
Aquino IV, Angara, Gatchalian and Escudero as
authors thereof, entitled
AN ACT INSTITUTIONALIZING THE
GRANT OF STUDENT FARE DIS
COUNT PRIVILEGES ON PUBLIC
TRANSPORTATION AND FOR
OTHER PURPOSES,
recommending its approval in substitution of
Senate Bill Nos. 662, 945, and 1226.
Sponsors: Senators Angara and Escudero
To the Calendar for Ordinary Business
COMMITTEE REPORT NO. 164
ON SENATE BILL NO. 1592
(Continuation)
objection, the Body resumed consideration, on Second
Reading, of Senate Bill No. 1592 (Committee Report
No. 164), entitled
AN ACT AMENDING SECTIONS 5, 6,
24, 25, 31,34, 35, 51, 79, 84, 86, 89, 90,
97, 99, 100, 101, 106, 107, 108, 109, 112,
114, 116, 148, 149, 150, 151, 155, 171,
196, 232, 237, 249, 264, AND 288;
CREATING NEW SECTIONS 148-A,
150-A, 237-A, 264-A, 264-B, AND 265-A;
ALL UNDER REPUBLIC ACT NO. 8424,
OTHERWISE KNOWN AS THE
NATIONAL INTERNAL REVENUE
CODE OF 1997, AS AMENDED, AND
FOR OTHER PURPOSES.
Senator Sotto stated that the parliamentary status
was still the period of interpellations.
Thereupon, the Chair recognized Senator Angara,
sponsor of the measure, and Senator Ejercito for his
interpellation.
Upon motion of Senator Sotto, the session was
suspended.
It was 3:24 p.m.
At 3:27 p.m., the session was resumed.
INTERPELLATION OF SENATOR EJERCITO
Preliminarily, Senator Ejercito noted that House
Bill No. 5636 proposes that taxpayers whose com
pensation income does not exceed P250,000 are
exempted from paying income tax, while under the
Senate version the exemption was only PI50,000.
He then asked on the reason behind the lowering of
the exemption on compensation income under the
Senate version and how many would benefit from
the adjusted compensation as compared to the House
version. Senator Angara replied that the exemption
was lowered under the Senate version in order to keep
the current exemption of up to four qualified depen
dents per taxpayer at P25,000 each, or an additional
exemption of up to PI 00,000 which is not present in
the House version. He clarified that aside from the
PI 50,000 exemption on top ofthe PI00,000 exemption
for four qualified dependents, the Committee also
maintained the 13th month and bonus exemption of
up to P82,000, which was passed in the 16,hCongress,
>o that taken together, the total available exemption
would be up to P332,000.
As to how the Philippines fares in terms of the
proposed personal income tax rates as compared to
other ASEAN countries. Senator Angara replied that
the Philippines’ top tax rate of 32% is probably
among the highest in the region, while the tax rates
of Malaysia and a lot of other ASEAN countries
have gone down to 20%.
Asked to comment on the proposition that
harmonizing the Philippine tax brackets with the rest
of the ASEAN structure is more important than
adjusting tax marginal rate downward. Senator
Angara replied that it is something that must be
considered, along with other factors, because the
r

country might become a common market at some
future time and there would be competition in
attracting the best talents in the region.
On whether the deletion of the provision allowing
P50,000 personal exemption per taxpayer was by
reason of the adjusted exemption on compensation
income, Senator Angara replied that the amount was
already included in the PI 50,000 personal exemption.
Asked if under the Senate version only PI 00,000
per taxpayer is the exempted compensation income.
Senator Angara replied in the negative, explaining
that it is still PI 50,000 and if taken together with the
exemption of up to four qualified dependents and the
exemption for bonus and the 13Ulmonth pay amounting
to P82,000, the total exemption could go as high as
P332,000.
Senator Ejercito noted that the House version
deleted the provision regarding allowable additional
exemption for dependents, and he commended Senator
Angara for restoring the provision because it would
provide additional financial space for taxpayers who
have dependents. He then asked if it would be pxrssible
to increase the additional allowable deduction from
P25,000 to P40,000 or P50,000, as he pointed out that
the amount of P25,000, which was enacted in 2008,
has no longer the same value at present considering
the effect of inflation. Agreeing with Senator Ejercito,
Senator Angara said that the exemption for depen
dents is meant to approximate the cost and not the
cost inputted in the P25,000 which has already become
outdated to a certain degree. However, he cautioned
of possible revenue repercussion if it would be
granted across-the-board. He said that there has to
be a balance to cut the perceived aggressiveness of
some of the other taxes like fuel and sugar, and that
the tax reform measure should be taken as a package
and the numbers must add up at the end.
Asked if he knew of any local data or study on
the impact of the imposition of tax on sugar-sweetened
beverages (SSBs) on the health of the Filipinos, its
direct correlation to obesity and diabetes incidence,
and as a source of excess calories in the Filipino diet.
Senator Angara cited the local study by the Food
and Nutrition Research Institute (FNRI) conducted
in 2003 which revealed a significant association
between SSBs intake and metabolic risk factor such
as being overweight or obese, having high cholesterol,
elevated triglycerides, reduced HDL cholesterol
and physical inactivity.
To the observation that it is also possible that the
consumption of SSBs is not the cause of obesity and
diabetes, but the Filipinos’ love for white rice or fried
food. Senator Angara replied that the overconsumption
of SSBs is a contributory factor to obesity and
diabetes.
Senator Ejercito then asked for concrete studies
showing that imposition of tax on SSBs resulted in
lower obesity and diabetes incidence.
Upon motion of Senator Angara, the session was
suspended.
It was 3:37 p.m.
Upon resumption. Senator Angara replied that
aside from other studies done across jurisdiction, a
2014 study in South Africa on the impact of the
imposition of 20% tax on SSBs revealed a 3.8%
reduction in obesity in adult males and 2.4% in adult
females.
Senator Ejercito cited studies identifying milk,
juices and other beverages as common energy source
for snacks among Filipino children. In fact, he said
that they were listed as among the affordable and
most consumed food items by Filipino children and
the consequential source of dietary sugar.
To the proposition that SSBs were the steady
source of sugar for the poor Filipino children. Senator
Angara believed that sugar is not bad if taken in
moderate amount, noting that most health departments
have recommended certain levels of sugar intake as
well as calories for an individual in a given day. He
stated that overconsumption is the concern because
of the proven or significant link to obesity and other
health diseases including diabetes. He also cited
statistics that showed that consumption of SSBs was
on the rise, especially among the poorer sectors.
To the observation that the increase in the prices
of SSBs would affect the nutrition of the children.
Senator Angara replied that on the contrary, as
revealed during the hearings, many of the SSBs are
actually empty calories and cannot substitute for rice
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or other sources of nutrition, but still, he stated, the
Committee took note of some of the SSBs that are
actually beneficial like milk and juices, the reason
there are exemptions for certain milk and milk
products with sugar contents below the threshold and
for unsweetened juices with implied implications that
such beverages have favorable effects.
Asked .whether higher taxes would also be
imposed on water considering that the ingredient of
one liter of soft drink is 80% to 90% water and the
proposal for the first two years is based on volume.
Senator Angara clarified that taxes would only be
imposed on beverages with sugar contents.
Asked for other factors that were considered in
proposing volumetric taxation for SSBs, aside from
the fact that FDA is incapable yet of measuring
sugar content. Senator Angara replied that as pointed
by Senator Gatchalian in his interpellation, volumetric
taxation is simpler to administer compared to the
sugar-content scheme.
Asked whether the content-based taxation for
SSBs would achieve the health goal of lowering
diabetes and obesity incidence. Senator Angara
answered in the affirmative, believing that the content-
based scheme is the more calibrated method because
it is based on sugar content. However, he said that
in taxation, there are always trade-offs between
simplicity, equity and efficiency, and it will be up to
the Chamber to make those value judgement.
As to whether the companies and the manufac
turers would innovate or reformulate their products
if the sugar-based content would be imposed. Senator
Angara stated that innovation and change in behavior
by manufacturers in both systems would most likely
happen since many of them would try to go under the
threshold to escape taxation, whereas the incentive in
a sugar-content based taxation is to decrease the
sugar content to avoid a higher tax.
Asked which SSBs use high-fructose com syrup
(HFCS) as sweetener. Senator Angara said that
carbonated beverages like cola use HFCS, which are
usually imported. On whether there would be implica
tions if HFCS would be imposed taxes, he replied
that there would be no tax as long as the law does
not specify destination. He said that in the Senate
version, HFCS, regardless of source, is subject to a
tax of PIO per liter.
Asked on the percentage of population belonging
to the informal economy and their source of income.
Senator Angara replied that 35% of the country’s
workforce belongs to the informal economy.
Adverting to a Nielsen Retail Establishment
Survey, Senator Ejercito cited that 84% of the
beverage sales are coming from the more than one
million sari-sari stores in the country. Asked on the
impact of the imposition of SSB tax on the sales and
income of these stores, carinderias and sidewalk
vendors considering that 50% of their sales come
from beverages. Senator Angara admitted that there
would be an impact considering that about one-third
of the sales of sari-sari stores are from SSBs, but
he explained that the impact depends on the elasticity
of the product or how the product would be sensitive
to a change in prices. However, he noted that some
of the drinks are highly inelastic in terms of demands
because their prices have not changed over the years;
thus, it is not going to be passed on to the sari-sari
stores and there would only be little change in price.
Senator Ejercito recalled that during the hearing,
it was revealed that various industries like sugar,
plastic and glass bottling and packaging, transport
and logistics sales advertising would be affected
once the sales of SSBs decline. Asked how much
would be the decrease in income as a result of the
expected decrease in the sales of SSBs, Senator
Angara replied that the predicted revenue goal from
the SSB tax as far as the Senate version is concerned
is between P37 billion to P50 billion which would
be spread out to the various industries, discounting
for any multiplier effects or spillover effects.
On tobacco and alcohol taxation. Senator Ejercito
asked if the DO^ when it proposed Package 1,
considered increasing tobacco and alcohol tax instead
of increasing the tax on the SSBs because tobacco
and alcohol are not considered necessities and not a
source of any nutrition. Senator Angara explained
that taxes on tobacco and alcohol were not considered
in the versions of both Houses as well as the Depart
ment of Finance because it was already included as
early as 2012, when the Sin Tax Law was amended
and passed by the 15,h Congress. He said that under
that law, there is indexation of alcohol and cigarette
products that would allow them to increase. But
he revealed that the DOF planned to includet he
commodities in Package 5.
As to the possibility of increasing the taxes of
tobacco and alcohol in lieu of the SSBs, Senator

Angara replied that he is yet to hear from the DOF
its version of Package 5 which is still under study.
Senator Ejercito noted that the excise tax on
majority of petroleum products has not been adjusted
since 1996. He commended Senator Angara for
proposing a lower excise tax on petroleum products
compared to the original proposals. Asked on the
inflationary effect of the increase in prices on
petroleum products, Senator Angara replied that the
inflation rate is around 0.5%.
On whether there are any precautionary measures
in case the annual inflation target is breached
considering that the inflationary impact rate is 3.5%,
Senator Angara replied that the predicted inflationary
rate for next year is 3% and so a 0.5% increase
would bring it to 3.5%, and as safeguard, the Senate
version provides that if the price of the Dubai crude
hits US$80 per barrel or in case the inflation rate hits
4%, then the imposition of the excise tax on oil would
be suspended.
On the aviation turbojet fuel. Senator Ejercito
noted that the Senate version’s proposed excise tax
on jet fuel is from P3.67 to P4.00 which is far from
the original proposal of P7, P9 and PIO. Asked what
were considered for keeping straight the minimal
P0.33 per liter. Senator Angara explained that one of
the considerations was the tourism industry and since
fuel accounts for around 29% of air transportation
operations cost, the increase in excise tax would be
passed on to the consuming public, making it more
expensive to travel, and as a consequence, it would
dampen the development and growth of the country
tourism industry. He recalled a proposal in the hearing
about imposing tax on tourist arrivals but was opposed
by Senator Gatchalian because it would send a wrong
message on the ground given that tourism is a job-
creating enterprise and imposing tax would discourage
tourists from coming in.
Moreover, Senator Angara cited the Convention
on International Civil Aviation, also known as the
Chicago Convention, which provides that “fuel and
lubricating oil on board an aircraft of a contracting
State and retained on board upon leaving the territory
shall be exempt from customs duty, inspection fees,
or similar national or local duties and charges”; hence,
any increase in excise tax on aviation gas would only
affect domestic carriers and if set too high would
place them at a disadvantage as compared to their
competitors. He affirmed that the bill would only be
taxing the domestic carriers and not the international
carriers because of the Chicago Convention.
On whether the Senate version included marking
on jet fuel. Senator Angara said that it does not.
Senator Ejercito expressed his relief that jet fuel
could not be not affected because, according to him,
any contaminants or foreign elements might affect
the said fuel’s octane level. Senator Angara thanked
Senator Ejercito for putting on record the said concern
which may be helpful in future deliberations.
Asked how the increase in petroleum prices
would effect the fishemien who use petroleum for
their motor bancas, Senator Angara stated that any
adverse effect on the fisherfolk would be most likely
cusliioned by the Unconditional Cash Transfer provided
in the earmarking provisions of the Senate version.
On low-cost housing. Senator Ejercito reported
that the total number of housing units produced by
the private sector from 2010 to 2015 was merely
1,198,000 or an average of less than 200,000 housing
units per year, and the profit margin of developers
engaged in socialized low-cost housing was very
small and closed to having breakeven. Considering
the proposal of removing the VAT exemption on low-
cost housing. Senator Ejercito feared that the increase
in housing prices would discourage buyers because
this would also mean higher interest rates for loans,
higher monthly amortization, and decline in sales on
the part of developers.
Senator Ejercito informed the Body that as of
January of this year, the housing backlog is 1.2 million
and might reach 6.7 million in 2022. Fearing that the
removal of VAT exemption for low-cost housing would
discourage developers to produce housing units because
the profit margin is very small. Senator Ejercito asked
whether housing backlogs could be addressed without
the housing production from the private sector.
In reply. Senator Angara explained that the Senate
version did not totally repeal the exemption for social
ized and low-cost housing units in the sense that the
exemption would be limited to those sold outside
Metro Manila because according to the Department
of Finance, much of the supply of socialized and low-
cost housing are located in Metro Manila while the
need is outside Metro Manila.
As regards the rationale behind lowering the
VAT exemption to P2 million and excluding those
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located in Metro Manila, Senator Angara clarified
that it was intended to align with the BOI incentives
for a selling price of less than P2 million for a unit
located outside Metro Manila.
Asked how much the expected revenue from the
proposed increase in excise tax on automobiles would
be and how much of it would come from the sale of
luxury vehicles. Senator Angara said that estimated
revenue in the Senate version would be PI4 billion to
PI 7 billion.
On whether it would be possible to raise the
intended revenue despite imposing additional taxes
on luxury vehicles. Senator Angara pointed out that
car sales continue to remain strong, given the growing
market, the population, the GDP growth per year and
the manageable inflation rate. Given that the buyers
of cars represent 20% of the richer population, he
said that the idea is for the government to capture
'Some revenue from this segment of population and
spend it on much-needed social services.
On the plausible impact of the excise tax on the
luxury car industry as a whole. Senator Ejercito
stated that his concern is directed towards the workers,
mechanics, service crew, and others in the said
industry who might also be affected by the said tax
increase. Senator Angara replied that with excise tax
on the luxury segment, the government would be able
to give back over PI00 billion in purchasing power to
the people, expanding,^in the process, the percentage
of the population who can afford to buy cars given
the attractive financing packages offered by banks
and other lending institutions.
Regarding the proposed Unconditional Cash
Transfer, Senator Ejercito cited numerous problems
encountered by the implementing agencies under the
DSWD. Asked if he was aware of the said problems
in the CCT, Senator Angara acknowledged that there
had been problems scaling up in the initial stages,
especially for such an ambitious program that aims
to deliver services to a wide portion of the population
residing in far-flung areas. He cited, for instance, the
issue on the distribution of ATM cards wherein not
everyone was given; thus, there arose the need for
the DSWD to hire workers whose job was to deliver
the money to the far-flung areas.
On the number of target households for the
Unconditional Cash Transfer, Senator Angara said
that the target would be at least 10 million households.
He also emphasized that, aside from expanding the
target from 4.4 million households to 10 million house
holds, the only difference is that the Unconditional
Cash Transfer is slightly easier to administer because
there is no more verification needed or certain condi
tions to comply with such as the number of check
ups, days in school, among others.
As to whether there are any other social mitigating
measures that could be implemented as considered
by the country's finance managers. Senator Angara
said that the Unconditional Cash Transfer is only
one of the many interventions that may be done for
the disadvantaged members of the society. Other
interventions, he said, are free education, free medi
cines, free dialysis, increased training, social pension
to senior citizens, supplemental feeding for children,
all of which are part of the earmarking provisions
of the TRAIN.
Because the current administrative cost and
personal service expenses for the initial four million
beneficiaries already amounts to P7 billion. Senator
Ejercito asked how much would be the additional
administrative cost and how many additional employ
ees would be hired to implement the Unconditional
Cash Transfer for 10 million households. Senator
Angara replied that the cost has been estimated at
around P2.5 billion.
At this juncture. Senator Ejercito thanked Senator
Angara for sponsoring and for pouring a lot or work
into the measure. Recognizing the proposed tax reform’s
aim to uplift the lives of the Filipinos, he stressed the
need to take into consideration the different sectors
that might be deeply affected by the said proposed
increase in taxes to ensure that not only would the
poor benefit from the tax revenues, but also that the
poor should not shoulder the majority of the burden
of taxation.
Senator Angara thanked Senator Ejercito’s
contributions and said that he would welcome any
amendments that would address the points he raised.
Upon motion of Senator Sotto, the session was
suspended.
It was 4:07 p.ni.
At 4:22 p.m., the session was resumed. ^
fT > V

SLISPKNSION OF CONSIOFRATION
OF SENATP: b il l n o . 1592
give him any certification because he was never a
client of DBS Bank.
Upon motion of Senator Sotto, there being
no objection, the Body suspended consideration
of the bill.
PRFVTLEGL SPEECH
OF SENATOR TRIELANES
Availing himself of the privilege hour, Senator
Trillanes said that he was rising to respond to
accusations of President Rodrigo Duterte of him
owning offshore bank accounts.
Using a series of slides to aid him in his response.
Senator Trillanes said that a few weeks back, he
was accused by President Duterte of having offshore
bank accounts, details of which, he said, were released
suspiciously to Mocha Uson and Erwin Tulfo, with
the latter claiming that he and President Duterte
have the same source. He said that in Erwin Tulfo’s
live broadcast, he discussed the supposed accounts
in detail. He said that another source was Mr. Ben
Tesioma of the “Davao Breaking News” who was
with President Duterte in Beijing.
He said that it was apparent that there was some
thing dubious even in the release of the information
itself because if the President was certain about his
findings, he should have not released the information
to people who are known to be spreading fake news.
Still, he revealed that he signed a bank waiver for
each of the 12 accounts discussed by Erwin Tulfo to
confront the allegations made against him.
He said that in the September 15 interview of
Erwin Tulfo with the President, the latter revealed
two accounts as belonging to him (Senator Trillanes),
one in the ANZ Bank in Zurich and another in DBS
Bank in Singapxjre. To debunk the claim as it attacked
his integrity and credibility as a public servant, he
said that, together with several media personalities,
he went to DBS Bank-Alexandra branch in Singapore
and showing his passport and the account details
mentioned by Erwin Tulfo, he asked the teller about
the status of his supposed account, but the teller told
him that no such account existed. He said that he
also gave the details of the account stated by the
President and again he was told that there was no
such account in the bank, whether closed or active,
single or joint. He said that the bank manager even
told him that the bank cannot entertain him much less
Nevertheless, he said that President Duterte
insisted on his allegation that when he learned that
the accounts were non-existent, he claimed that he
merely invented the bank account numbers. Addition
ally, he said that President Duterte also alleged that
the said DBS bank account was closed via online
on September 8 at ten o’clock in the evening, but in
response to queries by concerned netizens, the DBS
Bank explained, through its help desk, that to close
an account, “the account holder has to personally
close his or her account at its home branch or
through material submission of a closure authorization
form.” For the second time, he said. President Duterte
was caught lying.
Regarding the source of fake accounts. Senator
Trillanes identified one Daniel “Snooky” Cruz who
claims to be a former federal agent and well-connected
with the U.S. Embassy, a financial forensic expert
who holds office at LTA Building in Legaspi Village,
Makati City. He said that he was still finding out
Mr. Cruz’s links to the owner of the building. He also
showed photos of Mr. Cruz with certain officials
of the Duterte Administation to prove that he is
well-connected.
Senator Trillanes said that according to his
source, it was Daniel “Snooky” de Leon who sold to
a Cabinet official fake bank accounts purportedly
owned by Senator De Lima. At this juncture, he
pointed out the similarities of the fake DBS bank
accounts allegedly belonging to him and to Senator
De Lima’s both in the DBS Bank.
However, Senator Trillanes revealed that the
Cabinet official decided not to disclose these docu
ments to the public after learning from validating
government agencies that they were fake. Refusing
to concede, he said that Mr. Cruz changed a few
details on the same documents and sold them to
Malacahang officials for PIO million even though he
actually received P3 million as some middlemen most
likely gained from the transaction.
Thanking PMAers in Malacanang who alerted
him on the activities of Mr. Cruz, Senator Trillanes
presented a photo of President Duterte and Mr. Cruz
in Malacanang taken on August 31,2017, which was
one day after the date indicated on the faked
documents. 'igj'

On another matter. Senator Trillanes believed
that President Duterte brought up the issue of his
supposed offshore accounts to divert attention from
his own hidden wealth. He presented to the Body
slides listing important details from the President’s
bank accounts from September 18, 2006 up to
December 1, 2015 — flagged transactions that do
not include the chief executive’s P3 million savings
from his college days or his campaign funds for the
2016 national elections. He pointed out that on April
1, 2014 alone, Mr. Duterte purchased life insurance
investment policies worth P20 million each for his
four children or a total of P80 million.
Senator Trillanes also pointed out that there had
been 13 deposit transactions from April to October-
resulting in more than P50 million credited to the
President’s account. He also noted that aside from
the P40 million to P50 million which had been
deposited to the President’s account 21 times every
six months, a total of PI 93 million had been credited
to his account on October 7, 2013, — the highest
amount of transaction in a single day.
At this juncture, Senator Trillanes reminded
President Duterte of his pronouncements recently
that he was willing to be shot if proven that he has
bank deposits in excess of P40 million.
Relative thereto. Senator Trillanes informed the
Body that Sammy Gang Uy, a close friend of the
President and his family, had given the Duterte
children and Ms. Honeylet Avancena more than PIO
million every six months from 2011 to 2013 for a total
of PI 18 million. This, he said, is on top of the P40
million to P50 million being deposited to the President’s
account every April and October, most likely by the
same person. He pointed out that since Mr. Duterte
was a city mayor without income from other
businesses at the time, it was puzzling to learn that he
had credits and deposits amounting to more than P2
billion from September 2006 to December 2015.
In light of such information and the chief
executive’s claims that his evidence was merely
fabricated. Senator Trillanes dared President Duterte
to sign the waiver to open up his bank accounts and
show everyone, even the PMAers and soldiers fighting
in Marawi, that he was not corrupt.
In closing. Senator Trillanes formally submitted
his documents to the Senate Secretary for filing and
records purposes.
REFERRAL OF SPEECH
TO COMMITTEE
objection, the Chair referred the privilege speech of
Senator Trillanes to the Committee on Accountability
of Public Officers and Investigations.
COMMITTEE REPORT NO. 164
ON SENATE BILL NO. 1592
{Continuation)
objection, the Body resumed consideration, on Second
Reading, of Senate Bill No. 1592 (Committee Report
No. 164), entitled
AN ACT AMENDING SECTIONS 5, 6,
24, 25, 31,34, 35, 51, 79, 84, 86, 89, 90,
97, 99, 100, 101, 106, 107, 108, 109, 112,
114, 116, 148, 149, 150, 151, 155, 171,
196, 232, 237, 249, 264, AND 288;
CREATING NEW SECTIONS 148-A,
150-A 237-A 264-A 264-B, AND 265-A
ALL UNDER REPUBLIC ACT NO. 8424,
OTHERWISE KNOWN AS THE
NATIONAL INTERNAL REVENUE
CODE OF 1997, AS AMENDED, AND
FOR OTHER PURPOSES.
Senator Sotto stated that the parliamentary status
was still the period of interpellations.
Thereupon, the Chair recognized Senator Angara,
sponsor of the measure, and Senator Villanueva for
his interpellation.
INTERPELLATION
OF SENATOR VILLANUEVA
At the outset. Senator Villanueva commended
Senator Angara for shepherding an important piece
of legislation and remaining undaunted despite the
many challenges surrounding the measure.
He also noted that it would not be difficult for
the Body to give in to the request of the Executive
Branch to pass the tax reform bill given that indeed
more funding is necessary for the government to
realize its Build-Build-Build program, continue its
free tuition scheme for colleges and tech-voc training,
as well as address the issue of displaced workers
and need for Job creation. ^

Senator Villanueva recalled that Senate Bill
No. 1592 underwent 19 committee hearings and several
parallel consultations, which proved due diligence on
the part of Senator Angara to ensure that the Senate
version is what is really needed to expand oppor
tunities to all Filipinos and attain inclusion.
He pointed out that the Senate was deliberating
a tax measure amidst huge, unused appropriations of
several government agencies such as the P56 billion
for the Department of Education (DepEd), the P144.5
billion allotted to the DPWH and the P9.5 billion for
the Department of Agriculture’s Office of the Secretary.
He said that he found it hard to imagine how Congress
is set to pass a law imposing more taxes despite the
huge amount of unused government appropriations
that are only being reverted to the national treasury.
This, he said, was what prompted him, along with
Senators Lacson and Legarda, to propose the budget
reform bill which aims to allow for some house cleaning
in the budgets of the different agencies and ensure that
the monies appropriated to each one are not wasted.
Moreover, Senator Villanueva indicated his
desire to identify other possible solutions or alternative
mechanisms to make the bill truly progressive and not
regressive or anti-poor or anti-consumer. He believed
that the Department of Finance should be primarily
responsible in ensuring proper tax administration by
cleaning up the corrupt-ridden Bureau of Customs
and enhancing the tax collection efforts of the BIR.
He expressed confidence that Senator Angara would
be amenable to accepting his proposed amendments
in the near future.
Mindful of the difficulties Senator Angara had
gone through to prepare the Senate version of
the TRAIN and the DOF’s responsibility to ensure
that the government has sufficient funds for all its
programs. Senator Villanueva nevertheless stressed
the Senate’s responsibility to craft laws after careful
study and consultation with all affected stakeholders
around the country. He expressed hope that the
DOF would work with the Senate to achieve their
common goal but he, however, lamented the failure
of the DOF to give the senators specific figures on
the projected revenues from the tax bill since they
are needed to be reviewed before the measure is
passed. He also took offense at news articles which
criticized the Senate for its slow action on the
TRAIN. He clarified that the Senate is doing its best
to come up with a real measure that will help the
country and the people. He agreed with the saying
that “pressure can activate strength,’’and he believed
that even thougli the Senate is responsible for crafting
an effective tax reform measure, the DOF is expected
to do its part in properly implementing the same to
ensure that the law would be beneficial to all Filipinos.
For his part. Senator Angara thanked Senator
Villanueva, saying that he agreed with the latter’s
premise regarding the problem of government under
spending, an issue not unique to the present adminis
tration since those before it had labored under the
same problem of having so much fiscal space. He
echoed Senator Villanueva’s observation on the need
for administrative reforms to accompany the
implementation of the tax reform measure.
As regards the threshold in terms of personal
income tax (PIT), Senator Villanueva noted that with
the recent increase in the minimum wage rate in the
National Capital Region (NCR), the country would
have a highest minimum wage rate of P512/day
(NCR), which does not include the PlO/day cost of
living allowance (COLA). This, he said, would give
a minimum wage earner an estimated annual income
of more than PI47,000. However, he pointed out that
with a net taxable income of PI38,488.40 after
deducting SSS, Pag-IBIG and PhilHealth contributions,
the annual income isjust below the proposed threshold
of PI 50,000 for those exempt from paying the personal
income tax. He posited that assuming an annual
inflation rate of 3% which is midway of the 2% to 4%
target of the government, the threshold of PI 50,000
would have to be adjusted to around PI63,900 by
2021. He said that for the minimum wage income to
catch up with the amount in the same year, the
current minimum wage rate of P512 would have to
increase by P57, or a minimum wage rate of P569 a
day, by 2021. He said that if the minimum wage rate
increases by an average of PI 5 per year, the minimum
wage income would be able to catch up with the
proposed personal income tax threshold by 2021.
Senator Villanueva asked on the intention of
setting the PIT threshold at PI50,000, as he noted
that under tfie original DOF bill, the proposal was to
raise the threshold to P250,000 as against the Senate
version whose threshold is significantly lower and is
just above the current minimum wage income. He
recalled that Senator Gatchalian previously raised the
possibility of raising the threshold to P200,000.
In reply. Senator Angara said that the PI50,000
exemption seeks to cover the minimum wage earners
r

and to give an across-the-board relief to majority of
the taxpayers. He said that according to the DOF,
81% of the taxpayers would be exempt under the
P I50,000 threshold. He said that admittedly, the
exemption would give relief to a considerable number
of the population but at the same time, there is need
to balance the other parts of the package. He said
that since the Senate version lowered fuel taxes,
car taxes and sugar sweetened beverages taxes,
it had to balance the ledger with respect to the side
of exemptions which was the reason for a lower
exemption of PI50,000 across-the-board. He said
that the measure also kept the current tax provisions
on exemptions as well as the law passed in the lb"1
Congress that granted a bigger exemption to the
employees for their 13,h month pay and bonus.
He said that as earlier mentioned, there are up to
P332,000 worth of available exemptions for those
who qualify depending on their number of dependents.
He explained that another problem that would be
addressed by setting the exemption level at PI 50,000
is that each taxpayer would avail of the amount
regardless of income, and there would be no more
“wage distortion” problem wherein minimum wage
workers are reluctant to be promoted because once
they leave that safe haven of being a minimum wage
earner, they are already taxable on their entire
income. He believed that the disincentive for ininimum
wage earners to leave their status as minimum wage
earners would not be a good thing in the long run
because they would not be promoted, the reason why
there is a PI50,000 exemption.
Senator Villanueva said that it was precisely his
point, as he expressed concern that the tax could
easily catch up with the minimum wage income
earner. He noted that Section 24 of the NIRC
explicitly exempts minimum wage earners from paying
income tax.
Asked if the provision is being repealed under
the bill. Senator Angara replied that the intent of the
law is to keep the minimum wage earners always
tax-exempt.
Senator Villanueva asked whether Senator
Angara would be amenable to possibly increasing the
proposed threshold of PI 50,000 because the minimum
wage income might quickly catch up with such
threshold. He said that if the scenario happens, the
same problem would be faced again because if the
income exceeds the statutory minimum wage even
by just PI.00, then the entire income would be
taxable. He said that he has heard stories that many
minimum wage earners and employers agree to keep
the wages at the statutory minimum wage to avoid
paying taxes. He believed that the scenario could be
avoided by, first, repealing the explicit exemption of
those earning the statutory minimum wage and, second,
significantly raising the threshold so that the income
would not catch up with it even in the long run.
Senator Angara said that as much as he would
like to agree philosophically with Senator Villanueva
as it might be needed and it would be welcomed to
a majority of the working men and women, there is
a revenue impact which the legislators must be
cognizant of He said that with respect to the wage
distortion issue as feared by Senator Villanueva, it
must be stressed and stated for the record that even
if the income of the minimum wage earner goes
PI.00 over the statutory minimum wage, he would
only be taxed on that PI.00 excess and not on the
entire amount as provided for in the current tax
system. He clarified that the tax would be imposed
only on the increase over the minimum wage.
Senator Villanueva recalled that when he was
still in the Executive branch of government, many of
the employees would not want to be promoted to the
next salary grade because of fear of paying more
taxes. He said that during the period of amendments,
he would be introducing some mechanisms to
compensate the scenario as earlier mentioned.
On a related matter. Senator Villanueva noted
that under the House version and in some of the
proposals in the Senate version, the proposed top
marginal rate for the PIT is at 35% but under the bill,
the Committee adopted a current top marginal rate of
32%. Asked on the rationale for retaining the top
marginal rate at the current level of 32% instead
of the 35% proposed by the House version. Senator
Angara said that there are approximately 2,000
employees who would be covered by the House bill
offering a 35% top income tax bracket. He said that
the reason why the Senate maintained the 32% tax
rate which is what the current law provides has
already been alluded to by Senator Ejercito in his
interpellations where he mentioned the need to be
competitive in the region. He said that looking around
the region, the top average rate is around 24% to
26% and given that a small number of individuals
are affected, he felt that maintaining the current rate
of 32% would be the prudent decision. He said that
r

high-income individuals usually are creative persons
in the regions who would want to make the tax
jurisdiction attractive to them.
Senator Villanueva doubted if the proposal would
be felt by the 2,000 target beneficiaries. Moving on,
he recalled that in 2014, the top Filipino taxpayer
according to the BLR’s Top 500 list paid an income
tax of more than P280 million. He said that if the
taxable income of that person is imputed, he would
have had a taxable income of more than P875 million
in the same year.
He said that assuming that the proposed structure
of the bill is applied to the person, he would have
enjoyed a tax cut of P84,000 which is probably an
amount that the person could misplace or not notice
at all given the size of his income. However, he said
that under the House version of the measure, the
same person would have to pay instead an additional
income tax of P26 million. He observed that instead
of raising the tax of the multi-millionaires as intended
by the House version, it appears that the Senate is
giving them tax cuts which are small, if not
insignificant, relative to their income.
Asked on the wisdom behind the proposal. Senator
Angara said that the tax cut is an incidence of the
PI 50,000 tax exemption being made across-the-board.
He said that if the exemption was not made across-
the-board, the same problem of wage distortion
would be faced again. At this point, he said that he
would be open to any proposal that Senator Villanueva
may want to make with respect to the top bracket.
As regards Senator Villanueva’s observation that
the amount may not matter to the individuals
concerned. Senator Angara said that the legislators
also have to think about how or what means are
available to them because a lot of them may have
income tax only as a portion of their actual wealth.
He said that a lot of the wealthy individuals have
access to tax planning and they just might shift
their wealth to dividends, stock options, or other
means available to them, so there is that possibility
that raising the top bracket might actually decrease
the collection.
Senator Villanueva said that he would be intro
ducing amendments on the matter at the proper time.
Going back to the issue of threshold. Senator
Villanueva recalled that during the committee hearings.
the DOF proposed the threshold of P250,000 because
it intended to repeal Section 35 of the NIRC and
instead incorporated the personal exemption and
deductions per dependent in the threshold. He said
that he was initially apprehensive about the idea of
repealing the P25,000 deduction because he felt it
was unfair to taxpayers who have the additional
burden of raising children. However, he acknowledged
that Filipino culture demands that one’s support to
one’s family is not limited to one’s parents but also
extends to other members ofthe family such as siblings,
nephews, nieces and grandparents. He believed that
the existing scheme of additional deduction is silent
on the condition of the household members who also
contribute to the family expenses but who are unable
to enjoy the additional exemption because the law
does not recognize siblings, parents and grandparents
as dependents of an individual. He believed that
repealing Section 35 of the NIRC coupled by signifi
cantly raising the threshold would address the
issue in equity.
Asked on his thoughts about the matter. Senator
Angara said that Senator Villanueva raised salient
points regarding the Filipino culture and agrees with
him that based on the Filipino culture, it is notjust the
children who are taken care of by the breadwinners
of the family, but he stressed that the Committee had
to balance the needs of people with children vis-a-vis
those without, and equity would dictate that a person
with four children needs greater support than a person
without children. He said that it was such thought
process which dictated the maintenance of the existing
scheme of having four qualified dependents.
Asked what the P250,000 threshold represents in
terms of the number of taxpayers exempted. Senator
Angara said that based on 2013 data, it represents
83% of the taxpayers.
Senator Villanueva then requested the Committee
to provide the range of income of those who would
be covered by the personal income tax (PIT) under
the structure. He also asked for the number of
taxpayers exempted and the range of income covered
if the threshold is lowered to 150,000.
suspended.
It was 5:16 p.m.
r

Upon resumption, Senator Angara stated that
under the DOF and House versions, the P250,000
exemption covers government employees up to Salary
Grade 12 or those who receive a monthly salary of
P22,000; under the Senate version, the employee could
also be exempt assuming he/she has the maximum
number of dependents. To elaborate, he said that if the
person has three dependents and is in Salary Grade
11 receiving P20,179 salary per month or P326,506
annual gross income, he would be exempt from paying
taxes; the same goes with employees with two depen
dents and up to Salary Grade 10, or a monthly income
of approximately PI 8,700 or an annual gross income
of P306,000, for those with one dependent and up to
Salary Grade 8, or PI 6,000 monthly income or annual
gross income of P271,900, they would also be exempt.
Senator Angara clarified that the 81% is a
scaled-up version from the 2013 data and using 2013
data and the threshold of PI50,000, there would be
over 69% of taxpayer population. He said that with
the scaled-up version of 83% and the threshold of
P250,000; also based on the 2013 data, it would
cover up to 90% of the taxpayer population.
On another matter. Senator Villanueva cited the
issue on the preferential rate for the Regional
Operating Headquarters (ROHQ). He stated that
based on the data submitted by the DOF, as of 2015
there were 1,495 RHQ/ROHQ employees who enjoyed
the 15% preferential rate. He posited that in sum, the
employees earned a total of almost P2.8 billion and
paid income taxes worth P419 million, but the govern
ment lost around P400 million in 2015 due to the pre
ferential rate granted to the technical and managerial
employees of ROHQs. He stated that P400 million is
only equivalent to 0.13% of the total PIT collections
in 2015. He believed that foregoing such an amount
is not for naught and it would not be unfair to other
taxpayers considering that: 1) the government would
incentivize mobile members of the workforce who
could easily find work in other countries to enjoy
lower taxes and earn more instead of working in the
Philippines; and 2) the technical know-how and
managerial work would spill over to benefit the rest
of the economy.
Replying thereto. Senator Angara stated that
based on the 2015 data provided by the DOF, there
were 52 ROHQs representing 1,495 taxpayers with
a gross income of P2,976,600,000 with total taxes
paid amounting to P419,500,000. He stressed that
the Senate version would maintain the preferential
treatment for ROHQs and RHQs. He pointed out
that the fairness issue in the Tax Code would benefit
foreign investors who can come in and enjoy lower
income tax rates so long as they set up ROHQs or
RHQs. He informed the Body that one incentive was
given in the 1970s and the other was given in 1998.
He stated that both periods in the country’s history
were times when the country was looking for foreign
investments. He explained that the preferential rates
were enacted because the Philippines was competing
with the likes of Singapore and Hong Kong in the
1970s; in the late 1990s, preferential rates were
placed to attract some of the enterprises that were
leaving Hong Kong when the British handed over
Hong Kong to China in 1997.
Senator Angra opined that given the present
state of the country’s economy, there is no more
need for such perks, given that the Philippines is
already seen as an attractive investment destination
especially for such types of businesses because of
the talent pool, the English-speaking ability, the cost
of labor and the cost of real estate, among other
things. He recalled that during the hearing, there was
a debate with the DOF on whether to scrap or retain
it and when the fairness issue came up, the Committee
argued that government must reward those who
invested in the country in times of need and that it
was not fair for the government to remove something
from someone when times are good. He added that
it is not being Filipino and the country would not have
a debt of gratitude if the preferential rates were
removed, even as he admitted that the country is in
an unusual situation where the rates are maintained
for those enjoying them. He surmised that if the
company wants to employ more people, they are also
entitled to preferential rates. He stressed the need
for government to close such window going forward
to prevent further leakage. He said that a lot of
economists are pointing out that there is an equity
problem with respect to some local individuals since
expatriates would be getting paid a lot more than
their local counterparts.
Senator Angara believed that there has to be
some balance by way of technology transfer in terms
of skills and abilities. He stated that the Committee
felt that it was best to close the window going
forward as a matter of fairness, and only allow those
f5?

investors who are currently enjoying the preferential
rate to maintain what they are currently enjoying but
not remove them. He said that after the hearing,
some government employees approached him to say
that what he was lobbying for was right because one
cannot put a price on the Philippines’ investment
reputation. He recalled that there were instances in
the past when the country gained the reputation of
not fulfilling its covenants and would change the mles
midstream. He stressed the need for the country to
avoid such going forward.
Senator Villanueva said that the intent of Senator
Angara was very commendable, very Filipino and
very statesman-like.
On a related matter, Senator Villanueva noted
that the bill is proposing to adopt VAT-zero-rating to
the sales and services of entitites registered with
special economic zones and freeport zones. He
surmised that different special economic and freeport
zones have their own charters governing their
respective operations and fiscal incentives it may
grant to registered enterprises.
Asked on the number of special economic and
freeport zones. Senator Angara stated that the PEZA
has the most number of administrative zones — 11
legislated special economic zones and 345 PEZA-
registered eco-zones. He stated that in its investment-
promoting activities, PEZA is empowered to give a
mix of income tax holidays, preferential gross income
earned, 5% tax, and common incentives such as
double deductions for capital expenditures also known
as Net Operating Loss Carry Over or NOLCO, and
importation, and customs duties are relaxed, among
other things, the reason why PEZA has attracted its
fair share of employment over the years.
Senator Villanueva then inquired how much in
total value of annual investments in the special
economic zones and freeport zones contribute to the
economy in terms of employment.
suspended.
It was 5:31 p.m.
Senator Angara replied that for new investments
in the economic zones, there was a 71% growth or
P220 billion for the first six months, and the total current
stock investment in the PEZA zones is P456 billion.
Asked how many jobs were generated directly
by the economic and freeport zones. Senator Angara
replied that for the public economic zones, it is
130,188; for the private economic zones, 567,198;
for the IT parks and building, 660,299, for a total of
1,357,684 direct employment.
Senator Villanueva asked how many export-
oriented industries account for in the total number of
entities located in special economic zones and freeport
zones. He explained that he was asking specifically
for such information because a lot of studies conducted
by economists, like the UP School of Economics,
suggested giving tax incentives to those who would
choose to invest in the country. He said, however,
that the study also suggested lower incentives for
export-oriented industries. This, he opined, is where
the government should focus on. Senator Angara
replied that with respect to PEZA zones, about 90%
are export-oriented.
Asked how much the government is currently
foregoing in the status quo given the VAT exemptions
on sale of goods and services as provided in the
different charters of the special economic zones and
freeport zones. Senator Angara replied that the VAT
weight for the investment promotion industries totals
P159,825,108,765, of which P147 billion approximately
goes to PEZA.
Asked how many economic zones and freeport
zones have VAT-zero rating incentives under their
respective charter. Senator Angara replied that if the
locator of any investment promotion agency is paying
5% of gross income earned, that is in lieu of VAT,
but if the locator is enjoying an income tax holiday
offered in many investment promotion agencies, then
they are imposed a VAT.
Senator Villanueva further asked how many BPOs
are currently registered in the special economic
zones, noting that the government does not seem to
have a systematic collection of information concerning
ecozones and incentives. He said that incentives should
not be given blindly. Senator Angara replied that he
would furnish Senator Villanueva with the data.
As regards the collection of infomiation. Senator
Angara stated that the DOF, as the chief revenue
■ fr

agency of the government, was actually blind for a
long time before the Tax Incentives Management and
Transparency Act (TIMTA) was passed. He agreed
witli Senator Villanueva that the government was giving
out incentives generously, through investment promo
tion agencies, but the DOF was not aware how much
was given because there was no reportorial system
in place. He said that the enactment of TIMTA
provided the reportorial system to make available the
basis for evaluation of tax incentives. He explained
that with TIMTA, the government could properly weigh
how beneficial the incentives are to the economy,
against the number of jobs created, against the value-
added, against the technology transfer, and against all
the other factors that might bode well for the country.
Senator Angara informed the Body that the
current year is the first year of effectivity of TIMTA,
and that it was during the first quarter of 2017 that
the Committee finally knew the worth of incentives
the country was giving out. He noted that while other
countries have only have one single body which collects
revenue as well as give incentives, the Philippines,
however, have various implementing agencies.
At this juncture. Senator Drilon asked how much
incentives the government was giving out. Senator
Angara replied that for the tax expenditure on income
tax holiday, it is approximately P53 billion; for the tax
expenditure on special income tax rate, P32 billion;
for tax expenditure on custom duties, PI 8 billion, for a
total tax expenditure of approximately PI 04.4 billion.
Senator Villanueva then asked for a listing of the
number of BPOs that are currently registered in
special economic zones as he would like to validate
his data on the total number of direct employment
that they have provided. Senator Angara replied that
the data is not readily available at the moment but it
could be retrieve later.
Senator Villanueva observed that the proposed
measure provides that sale and actual shipment of
goods as well as services rendered to entities
registered with special economic zones and freeport
zones are subject to zero percent VAT rate. The
releasing clause in Sections 67 and 65 of RA 8756,
however, repealed VAT, he said. He then asked the
implication of such repeal of the VAT incentives
currently being enjoyed by the Regional Operating
Headquarters (ROHQs) and Regional Headquarters
(RHQs), whether they are registered with the PEZA
or economic zones. He also asked if they are
automatically subject to zero percent VAT rating.
In reply. Senator Angara said that the DOF
officials wanted to clear up any misconception that
might have been created by such repeal; hence, zero
rating status of the ROHQs and RHQs would be
maintained on the assumption that ROHQs and RHQs
registered with PEZA and economic zones
Noting that under the proposed measure, all
pending refund claims as of December 31, 2018, shall
be fully paid in cash and all applications filed from
January 1, 2018 shall be processed and must be
decided within 90 days from the filing of the VAT
refund application. Senator Villanueva asked how
many VAT refund applications were still pending and
how much is their total value. Senator Angara replied
that the total value of outstanding VAT refund is
P30 billion which represents multiple claims.
Asked if the government has enough funds to
pay for these refunds. Senator Angara stated that
the decision to appropriate money would come from
■Congress, though refunds could be had from the
amounts underspent by the government.
Asked why VAT refunds were difficult to process.
Senator Angara replied that aside from the availability
of cash to cover the refunds, there was also the
problem on the prevalence of fraudulent claims as
well as insufficient funds to meet legitimate claims.
Senator Villanueva expressed hope that the
government would ensure that VAT refunds and
claims would be paid.
Asked on the rationale for the deletion of the
phrase “tax clearance certificates” in Section 24
which amended Section 112 of the Tax Code, thus
giving the government the option to pay through tax
clearance certificates instead of cash. Senator Angara
recalled that the concept of a tax credit certificate
was created at the start of the imposition of the VAT
in the 1980s when the Philippines did not have enough
cash to pay the refunds. He explained that while tax
credit certificates became a cash management tool
at the time, the bill seeks to bring back refunds to its
true form as cash refunds so that the Philippines
could be at par with international standards.
suspended.
It was 5:57 p.m.

Upon resumption, Senator Villanueva noted that
Senate Bill No. 1592 speeified a caveat that proposed
rates would be implemented should the oil price fall
below US$80 or when the inflation falls below the
annual target.
Asked on the basis for the USS80 threshold,
Senator Angara replied that it was the level set by
House Bill No. 5636 and adopted by the Senate
version which is even lower than the DOF’s original
proposal of US$100 per barrel of crude oil which was
considered as a very high price for the commodity.
As regards the currency exchange threshold cited in
the discussion, he said that the Department of Finance
had pegged it at US$56.
Asked what benchmark would be used for official
data on the oil price if, for instance, the oil price hits
about US$80 during the middle of 2019 and drops
below threshold before the year ends; and if the
scheduled increase for 2010 will be implemented on
January 1 of that year. Senator Angara replied that
since the basis in the law is the average in Dubai
crude oil price for the first 15 days of the month based
on the Mean of Platts Singapore, the excise tax on
fuel shall be suspended when the price reaches
or exceeds US$80 per barrel. He added that under
the Senate version, the increase is set to take effect
January 1 of every year with a corresponding
P2.25 increase for the year 2020.
Asked for the new inflation estimates given the
proposed excise tax rate under Senate Bill No. 1592,
Senator Angara said that the DOF version is set at
3.9% and the Senate version at 3.5%.
Senator Villanueva expressed hope that a reasonable
inflation rate could be expected in the rationalization
of the petroleum excise tax proposal and requested a
copy of the DOF’s inflation estimates per industry
and region to which Senator Angara obliged.
Senator Villanueva expressed his support for the
tax measure because of its impact on public health
since the SSB proceeds would be used to adequately
finance nutrition programs for malnourished Filipinos.
He then asked for a mapping of households which
suffer from chronic hunger. Senator Angara replied
that in the first quarter of 2017 of the SWS survey.
2.7 million or 11.9% of the population are experiencing
involuntary hunger; another 9.7% or an estimated
2.2 million experienced moderate hunger and some
2.2% or 510,000 are experiencing severe hunger.
Senator Villanueva asked if the implementing
agencies of the CCT have mechanisms which would
identify and locate these households. In reply. Senator
Angara cited an ongoing program of the DOH in
connection with the National Dietary Supplementation
Program which identified 17 priority provinces for
the roll-out of the integrated management of acute
malnutrition which caters to three to four year olds in
day care and kinder to Grade VI in DepEd nationwide.
He said that the 17 priority provinces which have
high poverty incidence and are vulnerable to shocks,
disasters and the prevalence ofwasting include Antique,
Bohol, Camarines Sur, Catanduanes, Cotabato, Eastern
Samar, Lanao del Sur, Maguindanao, Masbate, Northern
Samar, Sulu, Cebu, Iloilo, Leyte, Davao del Sur, Davao
Occidental and Zamboanga del Sur.
However, Senator Villanueva pointed out that
the data presented were still broad and not systematic.
He underscored the importance of having an adequate
administrative system in place to ensure that such
targeted nutrition program will reach the intended
beneficiaries. Senator Angara stated that the basis
for the aforementioned data was the Listahan of the
DSWD, which is the list of the poorest households
in the country and is the basis to address any
problem related to hunger and poverty for the poorest
10 million households.
In previous debates. Senator Villanueva recalled
that he was always cited as the reason why Stevia
has been singled out in the provision on SSBs excise
tax proposal. He pointed out that while he expressed
full support for the growth of the Stevia industry in
Bocaue, Bulacan, he did not intend to use the measure
as a protectionist policy to allow the single industry to
flourish. Moreover, he clarified that he only cited
Stevia as an example in his proposal to exempt SSBs
using purely non-caloric sweeteners since he believed
that Senate Bill No. 1592 should be viewed as a health
measure during the plenary debates. However, after
hearing contrasting views from the members of the
health and scientific community on the association of
non-caloric sweeteners to health risk and given the
lack of consensus from the scientific community on
the health impact of the non-caloric sweeteners, he
asked his fellow legislators not to assume better
judgment on how these products affect the body. He

hoped that his amendment to exempt the products
using purely non-caloric sweeteners would be
considered at the proper time.
Senator Angara stated that he would welcome
any amendment from Senator Villanueva. He infonned
the Body that Stevia or steviol glycosides is obtained
from the leaves of stevia rebaudiana bertoni
and are naturally sourced unlike other non-caloric
sweeteners which are chemically synthesized.
On another matter, Senator Villanueva asked for
information on the top three most popular car models
sold in the Philippines and their corresponding retail
prices. Senator Angara replied that the top three
best-selling cars in 2016 are all made by Toyota,
namely, Vios with 36,256 units sold at P812,00 each,
Fortuner with 28,000 units sold at the price of
PI,503,000 each, and the Hi-Ace with close to 20,00
units sold at PI,326,000 each.
Asked by Senator Villanueva if Toyota models
are manufactured in the country. Senator Angara
said that only Vios is locally made while Fortuner and
Hi-Aee are imported.
Asked how much the increase would be in the
respective retail prices of the three Toyota models
with the proposed tax increase, Senator Angara
stated that the new standard retail price (SRP) of
Vios would be P834,000 from P812,000; Fortuner -
PI.608 million from PI,503 million; and Hi-Ace -
PI .411 million from PI .326 million. Assuming there
would be certain terms of payment for the said vehicles
such as 20% downpayment, or a monthly payment
for 60 months, he said that the difference in their
monthly amortization would be additional P375 per
month for Vios; PI,792 per month for Fortuner; and
PI,451 per month for Hi-Ace.
Given the rates proposed under the measure.
Senator Villanueva asked if there would be a shift in
consumer behavior as regards the purchase of cars
inasmuch as the DOF has estimated the price elasticity
of the car where the demand for cars would fall by
12% for every 10% increase in price. Senator Angara
replied in the affirmative.
Asked why there was no automatic indexation
clause in the automotive excise tax. Senator Angara
stated that the indexation is not really proper for
automobile excise taxes primarily because the prices
of automobiles do not change as often and are not
heavily affected by nomial inflation. He added that
in general, technology usually gets cheaper in time.
To illustrate, he said that 20 years ago, laptop
computers cost as much as PI00,000 but at present,
prices have gone down to as low as P20,000. He
said that even televisions of the same size are much
cheaper. He assured that it is highly unlikely for
lower-priced automobiles to be subject to higher
excise tax rates in the future.
On another point. Senator Villanueva stated that
according to the Chamber of Automotive Manufac
turers ofthe Philippines, Inc. (CAMPI), plants, including
parts makers, local suppliers and dealers, employ more
than 70,000 direct workers and 300,000 beneficiaries.
On whether the adjustment in automotive excise tax
would cause a negative impact on employment. Senator
Angara stated that the increase in tax rates would
result in over PI00 billion income returns which would
greatly expand the purchasing power of Filipinos. He
noted that as population grows, the demand also grows,
thereby the effect on income would compensate for
the higher excise taxes being imposed on ears.
As regards the impact of the measure on
employment. Senator Angara reported that in 2016,
the automotive industry employed 58,000 workers,
and that, in fact, only 77 workers were reported to
have been terminated for reasons like retrenchment
and business closures from 2014 to 2016. He assured
that the passage of TRAIN would not lead to massive
job losses considering that in the tobacco manufa
cturing sector, only 30 workers were terminated from
2014 to 2016 despite the imposition of higher taxes
on tobacco products.
As regards the increase of the motor vehicle users’
charge (MVUC) as a means to compensate any
revenue that might be lost in case the Senate increases
the threshold from PI50,000 to P200,000 or P250,000,
Senator Angara opined that a measure proposing to
increase the MVUC as part of the package was already
referred to the Committee on Public Works. He further
noted that a similar measure was being sponsored by
Congressman Villafuerte in Congress as an accompany
ing measure to the amnesty on estate tax.
With the pemoission of the Body, the session was
suspended.
It was 7:08 p.m.
r

On another point, Senator Villanueva stated
that currently, Presidential Decree No. 972 provides
that locally-produced coal is exempted from paying
excise taxes and only imported coal is imposed
with the PI 0 excise tax. Asked if only imported coal
would pay the higher tax proposal of P20 under
Senate Bill No. 1592, Senator Angara replied in
the affirmative.
Accordingly, Senator Villanueva stated that he
filed Senate Bill No. 1223 to repeal the excise tax
exemption being enjoyed by the local coal mining
industry for more than 40 years under PD 972. He
averred that with the current rate of PIO per metric
ton, the government has foregone PI20 million in
excise taxes on locally-produced coal, given the local
production of 12 million metric tons of coal in 2016.
Senator Angara stated that under Section 151 of
the NIRC, there is an excise tax of PIO per metric
ton of coal on both local extraction and importation;
hence, the tax rate remained unchanged since
1998 through EO 273 issued by President Aquino.
He also mentioned that Senate Bill No. 1223 was
already referred to the Committee on Environment
and Natural Resources.
As regards Senate Bill No. 1223, Senator Villanueva
explained that there was no proposal to increase
the PIO excise tax as he was apprehensive of the
unintended consequences of tax increase to the price
of electricity. He said that he only intended to cover
locally-produced coal which serves as the most
significant energy source in the country at 44.5%
as of 2015 which accounts for the highest share in
the power mix considering the total coal consumption
of 75% that goes to power generation. However,
he said that since the Philippines produces lower
grade coal, the government regularly imports higher
grade coals which are required by coal power plants
in the country. He expressed concern that increasing
the taxes on coal importation without addressing the
exemption under PD 972 might have direct conse
quences on electricity price. Thus, he suggested gene
rating funds by repealing the exemption on domestic
coal and collecting the funds from local production
even as he acknowledged that the proposed increase
is to incentivize the production of renewable and
sustainable energy.
Asked if he is amenable to the marginal increase
in coal excise tax coupled with the repeal of the
exemption of domestic coal. Senator Angara assured
that he would consider the proposal as he placed on
record that as regards the increases in electricity bill,
the effect of increase from PIO to P20 per metric
ton of coal tax would result in a 0.003 peso per
kilowatt hour (inclusive of VAT) for MERALCO
customers. He added that the impact to those
outsourcing their electricity from a full coal source
would be 0.009 peso or less than one centavo.
Expressing relief that the effect would not be so
much. Senator Villanueva reiterated that he has no
problems with the increase in excise tax from PIO to
P20 but that he only wanted to repeal PD 972
because he believes it must be repealed.
To the proposal of adopting carbon tax. Senator
Angara admitted that carbon tax is not one of the
matters being heard in the committee hearing although
some writers have proposed it. Senator Villanueva
explained that he mentioned carbon tax because the
National Tax Research Center estimated that PI22
billion could be generated therefrom with the passage
of TRAIN.
With respect to the increase of capital gains tax
on the sale of shares which are not listed in the stock
market from 10% to 20% considering the importance
of attracting investors in the country. Senator Angara
replied that there are different ways of taxing capital
gains. He said that some countries include it in the
schedular whereby depending on the level of income
of a certain individual, whether 30% or 20% or 15%,
capital gains tax is included in his or her income.
Senator Angara explained that the Philippines
follows a final tax wherein there is fixed percentage
regardless of one’s income. He said that the Committee
was recommending an increase of 20% to equate it
with other passive income such as interest earned
from bank deposits as well as increasing the tax for
foreign currency deposit from 7.5% to 20%.
As regards investment impact. Senator Angara
believed that the higher taxes might be offset by other
factors which influence investors such as infrastruc
ture, the type and size of the market, demand and
ease of doing business as well as corruption.
Expressing concern that raising dividend taxes
miglit discourage potential investors, Senator Villanueva
r

asked whether any studies have been conducted on
the potential impact that such a proposal would have
on household or individual beliavior toward investment.
Senator Angara replied that based on data culled
from 2015, 92% or an overwhelming majority of the
dividends are received by families in the lO"1decile,
which is the richest decile in income distribution.
Asked on the projected incremental revenue
from the measure. Senator Angara explained that
while initial estimates pegged it at PI30 billion,
information he had received from the DOF the other
day adjusted the projection to P60 billion net income.
He disclosed that an additional P25 billion could be
counted as additional revenue from minor items
which can provide substantial revenue following his
committee’s receipt of highly detailed information
regarding the VAT and the breakdown of numerous
special laws that are sought to be amended or
repealed. He said that the DOF had also revised its
estimates for revenues generated from taxing sugar
as well as some amendments that could be added for
the personal income tax scheme. He expressed
confidence that while including such changes would
raise the projected revenue to PI 10 billion or PI20
billion, his committee is determined to meet the
goverrunent’s goal of raising PI 30 billion from Tax
Package 1.
Asked for a breakdown of how much each
program/project would receive given the proposed
specified earmarking in the bill. Senator Angara
enumerated the allocations for the following:
p r (k ;r a m s ALLOCATION
Unconditional Cash Transfer P36.7B
Health programs
(coming from 50% of
sugar beverage tax
revenues) P19B to P25B
Assistance to displaced
workers At least P500M
Public Utility Vehicle
modernization P3.68B
Free Tuition Law P29.6B (which
may change
depending on
developments
in the budget
debates)
PROGRAMS ALLOCATION
Expansion of PhilHealth
primary care package
P21B
Free medicines PIB
Health professionals
education
P700 M
Social pension
of senior citizens
P1.5B
Grant of financing
to LGUs (management
of municipal waters
for fisherfolk)
P1.7B
Technical assistance
to sugar block farms
(affected by the sugar
beverage tax)
P2B
Housing projects
for fisherfolk
P3B
Infrastructure Around P26B
Asked to confirm whether the 50% tax on
Sweetened Beverages (SBS) would go to nutrition
and health. Senator Angara replied in the affirmative.
Senator Villanueva expressed his intention to introduce
amendments to the bill, such as allocating more funds
for the nutrition and health sector.
Since proposed periods of adjustment to the
cumulative CPI vary with different taxes, such that
adjustment for personal income tax is cumulative for
three years as opposed to the five-year period for
estate tax. Senator Villanueva sought clarification on
the rationale for such a difference and whether it is
possible to adopt uniform periods of adjustment for
the different taxes. Senator Angara explained that
while it is possible to adopt uniform period of
adjustment for inflation or indexation, the shorter
period points to the greater urgency of indexing
certain taxes like income taxes because it affects the
people’s daily lives. This, he said, is unlike real estate
taxes which is indexed every five years because it is
an isolated event and does not have as great an
impact on the population.
In closing. Senator Villanueva thanked Senator
Angara for his patience in responding to his queries,
expressed his support for the latter’s noble intention
of not only coming up with a better tax measure and
expressed his intention to introduce amendments at
the proper time.
r

TUESDAY, OCTOBER 3, 2017
AN ACT APPROPRIATING FUNDS FOR
THE OPERATION OF THE GOVERN
MENT OF THE REPUBLIC OF THE
PHILIPPINES EROM JANUARY ONE
TO DECEMBER THIRTY-ONE, TWO
THOUSAND AND EIGHTEEN, AND
FOR OTHER PURPOSES,
recommending its approval with amendments.
Sponsors: Senators Legarda, Villar, Angara,
Aquino IV, Lacson, Ejercito, and all
members of the Senate Committee on
Finance
ADJOURNMENT OF SESSION
Upon motion of Senator Zubiri, there being no
objection, the Chair declared the session adjourned
until three o’clock in the afternoon of the follow
ing day.
It was 7:31 p.m.
I hereby certify to the correctness of the
foregoing.
TTY. LUTGARDO B. BARBO
Secretary of the Senate t /'
/ r K.
Approved on November 16, 2017
540
For his part. Senator Angara said that he
appreciated Senator V illanueva’s important
interventions and expressed openness to his proposed
amendments at the proper time.
SUSPENSION OF CONSIDERATION
OF SENATE BILL NO. 1592
Upon motion of Senator Zubiri, there being
no objection, the Body suspended consideration
of the bill.
SENATE CONFEREES
Upon nomination by Senator Zubiri, there being
no objection, the Chair designated the following to
constitute the Senate panel in the bicameral
Conference Committee on the disagreeing provisions
of Senate Bill No. 1465 and House Bill No. 5670 (Free
Irrigation Service to Small Farmers Act of 2017);
Senator Villar as Chair; and Senators Ejercito,
Gatchalian Zubiri and Pangilinan as members.
ADDITIONAL REFERENCE OF BUSINESS
Atty. Regina Evangelista read the committee
report which the Chair assigned to the Calendar for
Ordinary Business:
Committee Report No. 167, submitted by the Com
mittee on Finance, on House Bill No. 6215,
introduced by Representative Nograles, et al,
entitled

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