Nineteen former heads and deputy chiefs of the Department of Finance (DOF) and the National Economic and Development Authority (NEDA) have given their full support to the DOF’s comprehensive tax reform program, which, they said, would “correct the structural weaknesses” of the country’s system and serve as a tool to decisively attack poverty and achieve inclusive growth.
Comprising 12 former DOF and NEDA bosses and seven finance undersecretaries, they “fully endorsed” the DOF’s tax reform proposals as they expressed in a manifesto their solidarity with the NEDA goal of transforming the Philippines into a “prosperous, predominantly middle-class society” in one generation or by year 2040.
“We, the former Secretaries and Undersecretaries of the DOF and the NEDA fully support the DOF’s comprehensive tax reform program as a long needed corrective to our tax system’s structural weaknesses and as a tool to achieve inclusive growth and transformative poverty reduction in our country,” the erstwhile senior government executives said in their joint statement.
They said that, “The DOF’s proposed comprehensive tax reform is progressive, timely, and well-crafted to achieve the vision of a prosperous Philippines free of poverty. For these reasons we strongly support the reform and urge the public to do the same.”
The manifesto was signed by former DOF secretaries Cesar Virata, Jose Isidro Camacho, Jesus Estanislao, Roberto De Ocampo, Jose Pardo, Cesar Purisima, and Juanita Amatong; and former NEDA directors-general Arsenio Balisacan, Emmanuel Esguerra, Cielito Habito, Felipe Medalla, and Romulo Neri.
It was also signed by ex-DOF undersecretaries Joel Bañares, Romeo Bernardo, Cornelio Gison, Lily Gruba, Milwida Guevara, Jose Emmanuel Reverente, and Florencia Tarriela.
“Overall, tax policy reforms are needed to make the tax system fairer, simpler, and more efficient, to put more money in people’s pockets, and encourage investment, job creation, and poverty reduction, while making our country more competitive regionally,” they said in the manifesto.
“We share NEDA’s goal—that by 2040, the Philippines will be a prosperous, predominantly middle-class society where no one is poor, and our people will live long, healthy lives, be smart and innovative, and live in a high-trust society,” they said.
“The Philippine Government aims to triple real per capita incomes and eradicate hunger and poverty by 2040, if not sooner,” they said. “We fully endorse the DOF’s tax reform as part of the solution toward achieving these aims.”
For them, the Duterte administration should carry out the proposed tax plan right away so it could sufficiently bankroll its inclusive growth and 2040 agendas, because “tax administration and budget reforms alone” will never raise the high level of revenues needed for the unparalleled investments in infrastructure, human capital and social protection for the poor and other vulnerable sectors.
The DOF’s proposed tax reforms are needed, they said, to correct the domestic tax system’s weaknesses that “make our economy less competitive relative to our neighbors and deprive our people of deeply needed investments to improve their lives.”
In the manifesto, they commended the Bureau of Internal Revenue (BIR) for focusing on “improving taxpayers’ satisfaction, protecting revenues and recapturing the public’s trust, including the expansion of the Large Taxpayers Service, simplification of forms and procedures, and improvement of electronic payment systems and risk-based audits.”
They lauded the Bureau of Customs (BOC) as well for its “anti-corruption and anti-smuggling efforts, including the full implementation of the Customs Modernization and Tariff Act, upgrading of electronic systems to achieve paperless transactions, and review of fuel marking, border patrol, and other measures to prevent technical smuggling.”
The DOF submitted to the Congress last September this proposed tax program’s first package, which is anchored on personal income tax cuts primarily for the benefit of wage earners and other low- and middle-income taxpayers.
To offset the projected revenue loss from such a reduction in personal income tax rates, Package 1 of the DOF reform package includes revenue-enhancing measures that seek to index the fuel excise tax to inflation, restructure the tax on automobiles, and expand the Value Added Tax (VAT) base.
A hefty part of the revenues to be raised from the DOF-proposed comprehensive tax plan will go to highly-targeted, time-bound transfer programs to cushion the impact of the planned tax rate adjustments on the poor and other vulnerable sectors.
In their manifesto, the former DOF and NEDA officials said, “We support DOF’s tax reform package 1, which seeks to equitably raise around 1 percent of GDP (Gross Domestic Product) in additional revenues to fund the Duterte administration’s 10-point agenda.”
“The personal income tax reform is long overdue and is a welcomed move,” they said. “This needs to be complemented by revenue enhancing measures to ensure that the poor and vulnerable are provided better education and health services, as well as benefit from better infrastructure.”
Hence, they said, “We support the increase in oil and automobile excise taxes as a very progressive means of raising revenues and addressing the negative externalities of pollution and traffic congestion as families optimize the purchase and use of cars.”
“Given that the top 10 percent of households (comprising the richest 2 million households) account for about 50 percent of all petroleum consumption, while the top 1 percent (comprising the richest 200,000 households) account for 13 percent of all petroleum consumption, raising oil excises means that we stop subsidizing the consumption of the rich and instead use the incremental tax revenues to fund infrastructure and protect the poor,” they said.
In this regard, they said, “we also support the plan to provide highly targeted transfers to the poor and vulnerable to mitigate the impact of higher oil, food, and transportation prices.”
They said that, “Broadening the VAT base, meanwhile, will remove the large number of exemptions currently contributing to inequity and massive leakages.”
“This is consistent with the international best practice of limiting exemptions to the necessities of life,” they said.
An increasing number of local business groups have already expressed their support for the DOF-proposed tax reform program, among them the Foundation for Economic Freedom, Federation of Filipino-Chinese Chambers of Commerce and Industry Inc., Tax Management Association of the Philippines, Association of the Filipino Franchisers Inc., Philippine Institute of Certified Public Accountants, and the Mindanao Business Council.
Also, an International Monetary Fund (IMF) team has given its nod to these proposed tax reforms for being “net revenue positive with due attention paid to equity.”
In a country assessment report released last September, a staff team for the IMF Executive Board said this “Staff supports the authorities’ push for a comprehensive tax policy reform that is net revenue positive with due attention paid to equity.”