Duterte signs tax reform bill, 2018 budget into law

Metro Manila (CNN Philippines, December 19) — President Rodrigo Duterte on Tuesday signed into law two big-ticket bills.

The first is the ₱3.77-trillion national budget for 2018, which Congress ratified on December 12. This is up 12 percent from the 2017 budget.

Read: Congress ratifies ₱3.77-T 2018 national budget

As mandated by the Constitution, the Education Department will get the biggest share with ₱553.3 billion. Next are the Department of the Interior and Local Government with ₱170.8 billion, the Department of National Defense with ₱149.7 billion and the Department of Social Welfare and Development with ₱141.8 billion.

Lower income tax, pricier fuel and beverages

The second is the tax reform bill, which Congress ratified on December 13 and is set to take effect on January 1, 2018.

Read: Lower income tax, higher taxes on sugar, petroleum, tobacco products by 2018

Under the measure, those earning ₱250,000 or less a year would be exempt from income tax, while 13th month pay and bonuses up to ₱90,000 would also be tax-free.

The new scheme will also lower income tax rates for those earning ₱2 million and below.

Meanwhile, small businesses with total annual sales of ₱3 million and below are exempt from value added tax. Small and micro businesses represent 98 percent of all registered businesses in the country.

However, the bill hikes tax on petroleum products.

Regular and premium unleaded will go up by ₱7 in 2018, ₱9 by 2019 and ₱10 by 2021. Diesel and bunker fuel — mostly used for public transportation — will also be collected in three tranches: ₱2.50 next year, ₱4.50 in 2019 and ₱6 in 2020.

For liquefied petroleum gas, the bicameral conference committee spread the ₱3 increase over three years — a peso per year increase from 2018 to 2020.

According to the Finance Department, the two million richest Filipino families consume half of the oil products in the country.

Other increases include a tax of ₱6 per liter for beverages using caloric and non-caloric sweeteners and ₱12 per liter for beverages using high fructose corn syrup.

All milk and coffee products are exempted from sugar tax, as well as natural fruit and vegetable juices and meal replacements. Medically-indicated beverages would not be taxed as well.

Meanwhile, tobacco excise taxes will be raised in phases at ₱2.50 per annum-starting at ₱32.50 next year.

CNN Philippines Digital Producer Chad de Guzman contributed to this report.