Senator Win Gatchalian asked the Department of Finance and the National Economic Development Authority for a detailed impact of the proposed Passive Income and Financial Intermediary Taxation Act (PIFITA) on the country’s economy.
“I want to understand how PIFITA, through the harmonization of tax, can create value to the economy,” Gatchalian said at a recent public hearing conducted by the Senate Committee on Ways and Means chaired by him.
Finance Undersecretary Karlo Fermin Adriano earlier disclosed that enactment of the PIFITA measure could lower the country’s revenue collection in the amount of P125.9 billion from 2025 to 2029.
However, given the projected reduction in the country’s tax take, it is also important to understand how the proposed measure will benefit the country, and in particular, investors, Gatchalian said.
“How will PIFITA result in a change in market behavior? How will this grow the different financial sectors, for example, the debt market, the equities market, or the insurance market? How can PIFITA increase market size and hopefully, how will this increase tax take from that increase in market size? I want to understand that and demonstrate that it’s not only going to be a reduction of taxes but also improve the sector by enlarging the market size,” he emphasized.
As filed by Gatchalian, the proposed PIFITA measure will essentially cut the cost of raising capital and debt by reducing the number of tax bases and rates applicable to passive income, financial intermediaries, and financial transactions.
If enacted into law, the PIFITA measure will level the field among players with better pricing information by removing tax-induced distortions and is expected to discourage arbitrage opportunities and enable the country to become more competitive compared to its peers in the ASEAN region.