The Department of Finance (DOF) has submitted to the Congress the first package of tax reforms designed to lower personal income taxes rates while raising revenues to help fund the Duterte administration’s 10-point socioeconomic agenda for inclusive growth.
The first of four sets of tax reforms was submitted to the House committee on ways and means chaired by Rep. Dakila Carlo Cua on Monday morning.
Topping these proposals are the restructuring of the personal income tax (PIT) system; expansion of the value-added tax (VAT) base by reducing the coverage of its exemptions; adjustment of excise taxes imposed on petroleum products; and restructuring the excise tax on automobiles except for buses, trucks, cargo vans, jeeps, jeepney substitutes and special purpose vehicles.
The PIT reforms include adjustments in the income tax brackets to correct so-called income creeping; reduce the personal income tax maximum rate over time to 25 percent from 32 percent at present, except for highest income earners; and shift to a simpler, modified gross system.
A quarter to a third of the net gain from the proposed tax reforms would be allocated for the conditional cash transfers, lifeline electricity subsidies, direct discounts and higher Philippine Health Insurance Corp. (PhilHealth) coverage, among other targeted subsidies, for the sectors to be affected by the new fuel prices arising from the adjustments in the excise tax on petroleum products.
DOF Secretary Carlos Dominguez III has pointed out that tax reform is crucial to the task of reconfiguring the Philippine economy to attain the Duterte administration’s goal of inclusive growth.
Dominguez said the DOF-proposed tax reforms is the linchpin of a broader reform package envisioned by the Duterte administration to attack generational poverty, restore peace and order, curb armed insurgencies, transform the Philippines into a high middle-income state and lift 10 million Filipinos from poverty by the end of the Duterte presidency in 2022.
“Without reforming our tax system so that it becomes fairer, simpler and more efficient, government cannot undertake the volume of spending required in achieving our goals” of reducing poverty from 26% to 17% in six years and elevating the Philippines to the status of a high-income country in one generation,” he said.
A comprehensive tax reform package that includes other measures will also augment the P1 trillion in investments needed to transform the country into a high-income economy in one generation or by 2040.
Earlier, an economic expert in the House of Representatives has similarly given his all-out support to this comprehensive tax program.
Vowing his full backing for the tax program, Albay Rep. Joey Salceda said the plan was much better than the one presented by the previous administration.
“Sir, you have my ardent support, and I’m sure my chairman will have the same…. I would like to congratulate you for your latest tax reform measure. It’s a very good measure,” Salceda told Dominguez during a House ways and means committee hearing on this tax plan.
Dominguez has thanked Salceda for his support, saying that it was “very heartening” coming from the congressman, who is considered an expert in the field of economics.
The finance chief has said that the two benchmarks to make the year-2022 goals of the Duterte administration achievable are 1) sustaining annual economic growth at 7 percent, and 2) preventing law enforcement from becoming so weak and the judicial system so corrupt as to nourish a criminal oligarchy that keeps most Filipinos mired in poverty.
“This is not a pipe dream. The medium- and long-term goals are eminently achievable. There is one benchmark we need to consistently attain year after year: this is to keep growth at 7% for the next generation,” Dominguez said.
“Such a sustained growth performance cannot be achieved if our economic performance is exclusive: enriching only a few and impoverishing the many. Nothing can be achieved if the nation slides into the cauldron of drug addiction and narco-politics. The nation cannot be at its best if law enforcement is weak and the judicial system is corrupted. Such conditions will only nourish a criminal oligarchy that keeps the majority mired in poverty,” he added.
Dominguez said the government plans to massively increase investments in infrastructure, human capital and social protection to achieve inclusive growth, which would require robust revenue inflows.