Finance Secretary Carlos Dominguez III said Thursday night the Philippines has reached the “make-or-break point” in its economic emergence, with the Comprehensive Tax Reform Program (CTRP) being pushed by the Duterte administration in the Congress setting the stage for the country to join the elite club of the world’s fast-growing, high-income economies one generation from now.
Dominguez made this statement before the Manila Overseas Press Club (MOPC) as he expressed the hope that the Congress could pass the final version of Package One of this “transformative” CTRP, dubbed as the Tax Reform for Acceleration and Inclusion Act (TRAIN), before the yearend and the four other tax reform packages in two years’ time.
“We are hopeful the first package will turn into law before the year ends,” said Dominguez during the media forum of the MOPC held at the Manila Golf and Country Club.
“Legislation is always a complex and protracted process—especially on the matter of taxes,” he added. “We are hopeful, however, that we could get the entire reform program legislated in a couple of years.”
TRAIN or Package One of the CTRP aims to slash income tax rates for majority of individual taxpayers, while generating additional revenues for the government’s massive spending on infrastructure and social services via the expansion of the value-added tax base, and adjustments in the excise taxes on fuel and automobiles, among other measures.
The House of Representatives approved its version of TRAIN as House Bill No. 5636 last May 31, while the Senate Ways and Means Committee has filed its version as Senate Bill 1592 last September 20. The Senate is set to start plenary debates on its TRAIN version later this month.
Package Two of the CTRP covers corporate income taxes and the modernization of fiscal incentives. Package Three covers property taxation, Package Four deals with capital income taxation, and Package Five covers environment and luxury taxation and health measures.
“With all these packages in place, we can assure the next generation of Filipinos fiscal stability, substantial public spending on the social goods and a high growth rate for the economy,” Dominguez said.
He said that the DOF decided to introduce the CTRP through a series of packages rather than as a whole so that each would have a better chance of being approved by the Congress at a much faster pace than it had done with previous tax reform programs.
Dominguez recalled that the last comprehensive tax reform program submitted to the Congress took the legislature five years of debates before it was approved. “We don’t want to wait that long.”
Dominguez said that on top of enabling the government “to better invest in people through better infrastructure, superior education, sufficient health services, adequate housing and reliable social protection,” the CTRP will also consolidate the country’s macroeconomic position, ensure quality jobs for young Filipinos and create a dynamic business environment.
“We have reached the make or break point in our economic emergence. Tax reform will be key to making it to the club of fast-growing, high-income economies,” he said.
Describing the CTRP as “a fundamental investment in a better future for the Filipino people,” Dominguez said this reform program will be “the keystone of an audacious economic strategy that will enable our economy to be investments-led, sustain one of the highest growth rates in the region and generously fund social development programs.”
Dominguez said reforming the government’s outdated tax policy “is most timely” as the Philippines is nearing its “demographic sweet spot” where millions of young Filipinos will be entering the workforce.
“Unless we achieve a high rate of economic expansion, we cannot meaningfully employ those million of young Filipinos, courting disillusionment,” he said.
“If we achieve the growth targets, on the other hand, we will bring down unemployment and poverty rates dramatically in the medium term. By investing in modern infrastructure, we will be more competitive for direct investments that will create the jobs we need to create,” Dominguez said.