Finance Secretary Carlos Dominguez III has proposed that the President’s economic team and the Congress meet as often as weekly to enable both the Executive and Legislative branches to thoroughly discuss and move ahead on urgent measures that would truly benefit the people during the second half of the Duterte presidency.
Dominguez said more frequent engagements between state economic managers and lawmakers will prevent bills approved by the Congress from being vetoed by the President for going beyond the limits of fiscal discipline strictly observed by the Duterte administration to fulfill its goal of high, sustainable and inclusive growth.
Fiscal discipline, Dominguez said, guarantees not only prudent state spending, but also ensures that the government has enough resources so that new measures do not take away money from millions of poor Filipinos who also need help through existing programs.
Dominguez said that to maintain fiscal discipline, the President had to veto some bills approved during the 17th Congress, a move that actually helped the Philippines secure a higher investment-grade credit rating of “BBB+” from S&P Global last April 30.
“These vetoes do not mean that we do not support you. The President’s vetoes invite us to take another approach,” Dominguez said during a recent meeting with senators.
“I propose that the economic team and Congress engage more frequently so that we can mutually move forward with legislation that truly contributes to the common good. In this direction, the DOF (Department of Finance) is already reorganizing to assign more full-time directors and staff to engage with Congress on a weekly basis,” he added.
Dominguez noted that in the 17th Congress alone, lawmakers had proposed 147 bills that collectively would either erode revenues by P178 billion or mandatorily add to the budget P799 billion, or a total of P977 billion that the government cannot afford to implement.
On top of these measures, Dominguez said 31 bills sought to create more freeports or ecozones, although as of 2017, the country already has 546 of these tax-free areas, all contributing to massive leakages in revenue collection.
“We do not think this is how we should do policy—that is create more tax-free zones or sectors, and ask other Filipinos to pay for these incentives. Surely there is a better way to help everyone,” Dominguez said.
He said that continued fiscal discipline, which has led to credit rating upgrades for the Philippines, is not solely the achievement of the Duterte administration, but was likewise the result of the reforms implemented by previous administrations and Congresses.
The Finance chief cited, for instance, the reform in the value-added tax (VAT) tax in 2005, which was initially viewed as an unpopular measure but helped nurse the country back to fiscal health—from paying 467 basis points in interest premiums in 2004, down to 110 basis points above the US Treasury bonds when the government issued its US dollar bond offering in January.
Dominguez pointed out, though, that laws such as the Tax Reform for Acceleration and Inclusion Act (TRAIN), which is the first package of the Duterte administration’s comprehensive tax reform program (CTRP); and the Rice Liberalization Law, which imposes tariffs on rice imports in lieu of quantitative restrictions (QRs), will be the 17th Congress’ lasting legacy to the Filipino people
“You did what is right so that we can provide every Filipino the means to live a better life. I have no doubt that generations of Filipinos will thank you deeply, Dominguez said as he cited the outgoing Congress as “among the most productive and hardworking that I have ever seen.”
As a result of the game-changing reforms passed by the 17th Congress, he said that rice prices are now up to P10 cheaper and inflation has fallen to 3 percent, or now within the target level of 2-4 percent set by the economic team, he noted.
TRAIN, meanwhile, has given taxpayers a 14thmonth pay because of the savings they got from personal income tax cuts, while enabling the government to hike spending on infrastructure by 46 percent in 2018, and in the process, creating around 370,000 jobs, Dominguez said.
With a total of P111 billion returned to the pockets of taxpayers in 2018, people now have more money to spend, he added.
“All of these can be summed up in two indicators: high growth rate of 6.2 percent and falling poverty rate from 27.6 to 21 percent in the first half of 2018 compared with the same period in 2015, even with higher inflation in 2018,” Dominguez said.
For this year, the DOF is pushing the approval of the rest of the CTRP’s components, especially Package 2, which aims to reduce the corporate income tax (CIT) rate to make it at par with the regional average, and rationalize fiscal incentives to make these specifically targeted, time-bound, performance-based and transparent.
The DOF said rationalizing fiscal incentives will level the playing field for investors and local businesses, and do away with the current unfair setup of big companies–many of which are on the list of Top 1000 corporations–paying discounted CIT rates of just 6 to 13 percent while most other businesses, mostly small and medium enterprises (SMEs) have to pay the regular rate of 30 percent.