MALACAfiAN PALACE

MANII.A

13 2{u?
.eEs
THE HOHORABLE SPEAKER OF THE HOUSE
AHD THE LADIE$ AHD GENTLEMEI'I OF
THE HOUSE OF REPRESENTATIVES

ln accordance with my firm mmmitment to uplift the lives of the Filipino

people, I sign into law Republic Act (RA) No. '109E3, entitled "AN ACT AMENDING
sEc?loNs 5, B, 24,25,27,31,32,33n 34,51,52,56,57,59, 74,7g,g4, g6, g0, sI,
g?, sg,'100,'10'1, 106,'107, 10gn 109, 11o, 112, 114, 116, 127,',3,9,,129, 145, 149,
149, 151, 155, 1FI, 174, 175, r77,179,179, tg0, 1g.l,,lg!, {93, 1g6,.lgg, 1gg, 180,
lg{, l9t, 193,'l!l4, 195, {96, 197,232,236,237,249,254,264,269, ltND 2gg;
CREATING HEW SECTIOIi|S 5t-A, {48-A, 150-A, {50-8, 237-A, 984-A, 2*4-&,
ANt) 265-A; AltD REPEALIHG sEcrloNs 3$, 62, AHB 89; ALL UI*DER
REFUBLIC ACT NO. 8424, OTHERWSE KNOWN A$ THE IIATIOHAL INTERNAL
REVENUE COCIE OF 1997, AS AMENDED, AND FOR OTHEN PUNPOSE$,'' Or
the Tax Reform for Acceleration and lnclusion (TRAIN| Act.

I. GENERAL COMiliXNTS

For two decades, we have been constrained by the outdated provisions of our
tax laws under the National lnternal Revenue Code, as amended. ln particular, the
high personal income tax rates have placed a significant burden to our laborers.
Today, a rnajor breakthrough in the legislative history has taken place, where we not
only break this trend but provide for additional resources that we will use to fund the
social and economic infrastructure that wlll beneftt the poor"

This momentous achievement would not be possible without the collective

effofis of our tegislators in the 17h Congress, in particular, the Chairrnen of the
House Committee on Ways and Means, and the Senate Committee on Ways and
Means.

II. DIRECT VETO

By the power vested in me by Article Vl, Section 27 {2) of the Constitution,

which provides that "the Pre*ident shall have the power to veto any particular item or
iterns in an appropriation, revenu€, or tariff bill,' I hereby register the follswing line
item vetoes to this [aw:

A. Reduced income tax rate of employees of Regional Headquartere {RHQS},

Regional Operating Headquarters (ROHOS), Offrhore Banking Units
(OBU$,), and Petrolaum $ervica Contractors and $uhcontractors

" TTIE TRESMEN"T OF T}M THILITPINES

 I am constrained to veto the proviso under Section 6 (f) of the enrolled bill
that effectively maintains the special tax rate af 1So/o of grCIss income for the
aforementioned employees, to wit:
,.PROVIDED, HOWEVER, THAT EXISTING RHQS'ROHQS, OBUS
OR
PETROLEIJM SERVICE CONTRACTOR$ AND SUBCOHTRACTORS
PRESHHTLY AVAILING OF PREFEREHTIAL T$( RATES FOR SUALIFIED
EMFLOYEES SHALL COHTINUE TO BE ENTITLED TO AVAIL OF THE
PREFERENTIAL T$( RATE FOR PRESENT AI{D FUTURE QUALIFIED
EMPLOYEES.'

While I understand the laudable objective of the proposal, the provision is

violative of the Equal Protection Clausa under Section 1, Article lll of the 1987
Constitution, as well as the rule of equity and uniformity in the application of the
burden sf taxation:

Section 1. No person shall be deprived of life, liberty, or prcperty without due

proce$s sf law, nor shall any person be denied the equal prctection sf the
Iaws.

ln line with this, the oveniding consideration is the promotion of fairness of the
tax system for individuals perforning similar work. Given the significant reduction in
the personal income tax, the employees of these firms shCIuld follow the regular tax
rates applicable to other individual taxpayers.

B, Zero-rating of sales of goods and services to separate customs territory

and tourism enterprise zones

Second, I am constrained to veto the provisions under Section 31 and Section

33 of the enrolled bill, to wit:

Section 31:

{2} $ALE JIHD DEL|VSRY OF GCIOD$ TO:

{i} REGISTERED ENTERPRISES II!'ITHIN A SEPARATE CU$TOMS

TERRITORY AS PROVIDED UNDER SPEGIAL LAWS; AND

{II} REGISTEREO ENTERPRISES wlTHIN TOURI$M ENTERFRISE ZOHTS

AT DECLARED BY
THE TOURISM INFRA$TRUCTURE AHD
ENTERPRISE ZONE AUTHORITY {TIEZA} SUBJECT TO THE
PROVISIONS UNNER REPI'BLIC,ACT NO. g5g3 OR THE TOURISM ACT
oF ?009.

Section 33:

(sl sERYtcEs RENDEREE TO;

I- EEGISTERED Ei'TERPEISg$ WTHIH A SEFARIITE CUSTOM$

TERRITORY A$ PROVIDE0 UNDER SPECIAL LAWS; AND
 Il. REGISTEREO EHTERPRISES Ut lTHlH TOURlsil EfTITEHPRISE ZOt'tES
AS T}ECLARED BY THE TIEZA SUBJECT TO THE PROVI$IOH$
UNOER
REPUBLIC ACT NO. 9593 OR THE TOURISM ACT OF 2009.

The above prwisions go against the principle of lirniting the VAT zenr-rating
to direct exporters. The proliferation of separate customs teriitories, which include
buildings, creates significant leakages in our tax system" This makes the tax
system
ftighly inequitable and significantly reduces the revenues that could be better u*ed
for the poor. As to tourism enterprises, the current law only allows for duty and
tax
free importation of capital equipment, transportation equipment and other goods.
The TIEZA Law explicitly allows only duty and tax iree importation or iapital
equipment, transportafion equipmentand*other goods (in certain case$ and always
subjec{ to rules provided by the DOf}. Thus, this provision actually grants a
new
incentive to suppliers of registered tourisrn enterprises. At any rate, ihe TIEZA law,
which is still in effect fer two rnora years, ean be used to avail of the above-
mentioned incentives.

C. Exemption froSr percentage tax of gross sales/receipts not exceeding five

hundred thousand Fe$os (P500,000.00)

I am ccnstrained to veto the prnvision which provides for the above under
line
12 o{ $ec. 38 in the enrCIlled bill, to wit

.,4Nf,} BEGIHNING
JAHUARY 1, E019, SELF.EMPLOYEN AHD PROFES$IOHALS
ffiTH T0TAL AI{I{UAL GRO$S sALEs ANI}/O* SRos$ ..-
Hicelprs Noi
EXCEEDING FIVE HUNDRED THOUSANO PE.OS IESOO,OOOIJ'

The propossd exemption from percentage tax will result in unneces$ary

erosion of revenues and would lead to abuse and leakages. lhe subiect taxpayeri
under this pr:ovision are already exempted from the fnT, thus, ifrl n**,,
three
percent percentage tax on gro$s sales or gross receipts is considereO
as their fair
share in contributing ta the revenue base of ttre cauntry.

o. Exemption of various petroleum products fram excise tax when used as

input, feedstock' or as ravv rnaterial in the manufacturing oi petrochemical
products, nr in the refining of petroleum products, or as replacement
fuel for
natural gas fired combined cycle power plants

I am constrained ts veto the provieion which provides for the above under line
25 Sec. 43 of the enrolled bill, to wit:
.,PETROLEUM
PROOUET$, IHSLUNIilG NAPHTHA, LPG. PETROLEUIIfi, COKE,
RERHERY FUEL AHD orHER FRooUCTs oF nrsfrr-r-*ircn, r[irru
UsED
lllPUT, FEEIISTOCI( OR AS RAIiY MI|TERIAL tN THE rrlnr*i.lr*,cTunrxG A$
oF
PETRocHEilllsAL PRoDUCTE, oR rN TlrE nrrrr*rrue- oF- pETRoLEUnfi
PRODUGTS' OR AS REPLACEMEHT FUEL FOR NATI,'RAL.CAS.FIRED.
coltilBNElt cYcLE PouuEn pLANT [,] tN LIEU oF LocALLt-ExrRAcrEn
NATURAL GAs ouRlNG THE Hotl.AvAilmrlrrv rfensoF, ilrii.lrcr
RULE$ AHtr REGULlrrloHs r0 EE PRoltrulcArip-af
ro rHE
iriisrincrAny
OF
FINANCE, PER LITER OF VO-LUM-E CAPACIW, ZERO (PO.OO}, TUNTXENMORE.
THJ\? THE BY.FRONUGT INCLUOING FUEL bru, UIrSEr. FUEL, KEROSEHE,
 PYROLYSIq GASoLINE, LIQUiHEn PETROLEUTT{ GAsES,
AtUt} $tMtLAR OILS
HAYING ['lloRE oR LE$$ THE sArur sEnrnmruc-Fbd[h,
PRODUCED lH THE PRocEsstNG oF NApHTHA tHTo
wnlcr{ ARE
isinocnEMEAL
PR0nUQTS SHALL BE suBJEcr
rHE sEcrlou,
ro ilienpplrc*eli- excrse rAx
lfEqryEq*t!- ExcEFr wuer,r ducrr-riiFnonucrs
TR.A!*ISFERREII ro ANy or rxf i-oidr- oii- iEEilxEnre"d -ifinoue ARE
BARTER g[-E]GI!ANGE, FoR THE punposr or runrnEn piibcrsstruG
H *ALE,
BLENIIIHG lNTo rlNmxeo pnonutri witcH ARE $uBJEcT oR
To ExctrE TAx
UNDER THIS SECTION."

The pravision runs the risk of being too general, covering all types
petroleum products, which may be subject to auuse-by of
dc thus
taxpayerr,
massive revenue erosion. At any rata, the tax cade atriaoy identifieslead to
petroleum which
products can be exempted.

E. Earmarking of incremental tobacco taxes

I am constrained to veto the provision which provides
fsr the above in lines ?0
to 29 of Sec. 82 of the enrolled bill, to wit

"NOTWITHSTAHTilNG AI{Y PROVISION$ HEREIH TO THE CONTRARY,

THE
IHCREMEI-ITAL REVEf{UE$ THE TOBACCCI TAXES UNDER THIS ACT
fRoM
SHALL EE SUBJECT TO SECTIOilI 3 OF REPUBLIC ACT rtO" rrrr, OTHERW|SE
KIttowH As 'AN Acr rCI PR0M0TE THE DEvEr-OinaEui FARMER rN oi irir
IryE VIRGINIA TOBACCO PRONUSNG FROVINCES" NNO SiCTIOH 8 OF
REPUBLIG ACT NO* 8249, OTHERWSE KilOWH AS
sEcrloHs {3s, 140 & {4t oF THE NATtot{AL TNTERNAL'Af.I
ACi AMETTIDING
AMENDED, AND FOR OTHER PURPOSES.','
nevixue soDE, AS

The provision effectively amends the $in Tax Law, or RA 10351, which provides
for guaranteed funds for universal health care, The pr',ovision will effectively
diminish
the share of the health sector in ihe proposed alloca*an.

III. CLOSING STATEMENT

I am very pleased to sign this very important piece of }egislation mainly

because of my sincere cbiective to help our [oor countryrnen and eaJe the
burden of
the common taxpayers. This govemment will do its best ts i*plem*nt this
noble
objective under the tax package whife maintaining fiscil Jisciptine ano
adhering ryfomr
to the true principres of taxation: fair, simple, and efficient.

Fffi:M,Wi(&4*r r; s!*: 6.tiwr4:Ewl@:i

*!P$Br"IC Or nxr FXtrI.IfrIllI$ ffffi$$"w$.&',&g:gF frj{}$ew

P**D 2016 - 0sil4s8

*xr-r@*Lriirj-Euii* Ps4rr, ] ,ir t !rf.i!"rr-.:

IIi - ;it--l-ii,{S *fi:}