Finance Secretary Carlos Dominguez III said the proposed comprehensive tax reform program of the Duterte administration will serve as the fiscal buffer that would enable the government to pursue its expansionary economic policy anchored on an ambitious “Build, Build, Build” infrastructure program consisting of some 75 major flagship projects that would either be completed or started over the next five years.
The first package of this tax reform program—the Tax Reform for Acceleration and Inclusion Act (TRAIN)–is meant to provide the government with sufficient funds to maintain fiscal discipline while it invests heavily not only in infrastructure, but also in programs to expand access to social services such as health and education, Dominguez said.
“It is important, to be sure, that the tax reform program be passed as soon as possible. Tax reform will give us the fiscal space to pursue the expansionary measures. Without the additional revenues the reform package will bring, we cannot fully pursue the infrastructure program,” Dominguez said in his videotaped message to the Economic Journalists Association of the Philippines during its Economic Forum held at the Ayutamiento building of the Bureau of Treasury (BTr) in Manila.
Earlier, Dominguez told members of the foreign media that the failure to pass the TRAIN would “be very bad for the government’s infra program,” which, he said, would have to be “whittled down by 30 to 40 percent” without tax reform.
In his message to EJAP, Dominguez said the government has “identified 75 major infra projects to be undertaken over the next few years” under its “Build, Build, Build” program.
“Of these flagship projects, 18 have been approved by the NEDA Board. When the shovels hit the ground, expect an economic growth spurt,” he said.
Dominguez said that aside from ensuring the fiscal space needed for the government’s massive spending on infra and social services, the Duterte administration also has to deal with constraints such as the rehabilitation of Marawi City, which will likely cost P30 billion, and a new law mandating free tuition and other school fees for all public tertiary institutions, which still has no clear funding mechanism.
“I assure you we will not compromise on fiscal discipline and court runaway debts to please populist demands,” Dominguez said.
He said that while pursuing tax reform, the government will also continue reforming its main revenue agencies—the Bureaus of Internal Revenue (BIR) and of Customs (BOC).
As a result of the administrative reforms now being put in place in these two agencies, Dominguez said the BIR posted a 9.32% increase in collections from January to July against the same period last year, while that of the BOC improved 11.48% in the same period.
Dominguez said that one year into the administration’s term, opinion polls show that people “are as optimistic as they have ever been,” which, he said, is a “vote of confidence” in the leadership of President Duterte.
“We treat that as inspiration to work harder and deliver better,” he said. “We want to provide the governance our people deserve.”
In his message, Dominguez also commended economic journalists for “performing with fairness and competence” and for being “very helpful in building the financial and economic literacy of our people.”
“Such broad-based literacy is indispensable as we struggle to achieve inclusive growth in a participatory society,” Dominguez said.
This “participatory” approach, he said, is embodied in the two Sulong Pilipinas national workshops, the first of which was organized in June 2016 by the then-incoming Duterte administration, and the second one held earlier this month, to gather the inputs of a wide cross section of society on how the government should effectively proceed with its priority programs.
“The economic program of the Duterte administration is not crafted by elves secluded in dark workshops. It is based on comprehensive and transparent consultations with all stakeholders,” Dominguez said.
“This is how we intend to progress: on the basis of trust and openness. Consultations will be a continuing process. As a rule, the more vulnerable the social sectors are, the more urgent their recommendations will be considered,” he added.
Dominguez described the 6.5 percent growth of the economy in the second quarter “as a good number, coming out of an election year” and with the Philippines emerging as Asia’s second fastest economy after China.
He said he expects this robust pace of the economy to even go faster in the succeeding quarter as the government begins rolling out its P8-trillion “Build, Build, Build” program and remittance and investment flows remain strong.
“We can no longer postpone investments in infra. For three decades, our economy underspent on infrastructure as we imposed one austerity program after another to climb out of the debt crisis. We have successfully worked down our debt load. Our credit rating improved to investment grade,” Dominguez said.
He reiterated the government’s commitment to keep the budget deficit ceiling at 3 percent of the GDP even with its accelerated infra spending, which would be funded initially by official development assistance that present lower rates than the best that commercial markets can offer.