Executive Secretary Salvador Medialdea, BIR Commissioner Billy Dulay, [Finance] Undersecretary Antonette Tionko, [PNP] Lieutenant General Archie Gamboa, [PNP] Major General Guillermo Eleazar, Bureau of Customs Deputy Commissioner Edward Dy Buco, PAGCOR President Fred Lim, fellow workers in government, members of the business community led by one of our biggest taxpayers, Japan Tobacco International led by its president Manos Koukourakis, men and women of the Bureau of Internal Revenue, ladies and gentlemen:
This is the 115th anniversary of the Bureau of Internal Revenue. Let me just say that the Department of Finance is 122 years old. In fact, the DOF was established prior to the establishment of the first Republic of the Philippines. You know, at that time, they were fighting a revolution, and I guess they needed a treasurer to pay the bills. So in a way, I think the DOF is the oldest department in Philippine Government.
As they said earlier, BIR is number one not only for the reasons Billy said–because they work for one country, they have one goal–they are also number one because they collect the largest amount of revenue for the national government. So let’s give them a big hand.
For over a century, the BIR has served as the main revenue collection agency of the national government. The revenues collected enabled government to fund its operations and shape our country’s development through economic and social programs. Your good work contributes to our ability to make critical investments in improving the health and education of our people and in the quality of our infrastructure.
It is true that the BIR has been one of the most vulnerable public agencies. This is due to the wide margins of discretions and badly designed tax policies that weaken fidelity to the service.
Over the last three years, we have worked very hard to improve the design of our tax policies as well as reengineer our tax administration. In the comprehensive tax reform package, which remains a work in progress, we seek to achieve a simplified, fair and efficient tax system that will enhance compliance and reduce both avoidance and evasion. We have likewise instituted reforms in tax administration to reduce the margin of discretion, improve monitoring, and bring the power of new information technology to bear on our operations.
The reforms have brought vast improvements in the agency’s performance.
Last year, we raised our tax effort to unprecedented levels. The BIR’s collections from January to June this year amounted to 1.07 trillion and attained 95 percent of the goal we set for that period. This is very commendable, and again, I want to commend the leadership and the staff of the BIR.
The revenues this agency collect go a long way in funding President Duterte’s priority programs that will improve the lives of our people. You are providing the revenues required to sustain the Build, Build, Build infrastructure program, the expanded social services, including the conditional and unconditional cash transfer programs, free tuition program in State Universities and Colleges, universal health care, and the continuing improvements to the country’s defense and public safety capabilities.
Your enhanced revenue performance allowed us to properly maintain fiscal discipline despite a larger spending program. This made possible the Philippines’ recent credit rating upgrade to BBB plus—the best grade the nation ever achieved. This means the government, business, and every Filipino can borrow more cheaply to invest and create more jobs.
Last year’s numbers show we have brought down unemployment levels to historic lows. We are on track to sustain a GDP growth rate of above 6 percent this year and the coming years. This will allow us to meet the overarching goal of bringing down poverty incidence from 21.6 percent in 2015 to only 14 percent by 2022.
The entire economic strategy of the Duterte administration will fail if our revenue efforts fail. From this perspective, the BIR is leading the charge to bring the change our people yearn for and to win the future our people deserve. Our work will help lift one million Filipinos out of poverty every year.
As the economy rapidly expands, so too must the magnitude of public investments and social programs. For this reason, we are gearing up to collect in the trillions.
Fortunately, the task is made easier by the modernization of our tax policies. As we saw from the passage of the TRAIN Law, it is actually possible to improve revenue generation and the people’s purchasing power at the same time. While TRAIN reduced tax rates for 99 percent of our workers–putting more money in their pockets, it also boosted our collection efforts. There is beauty in the tax system that upholds simplicity, fairness and efficiency.
After the 2019 budget was finally passed and the election ban was lifted, distribution of this year’s unconditional cash transfers began in early July. Over 3.6 million beneficiaries have already received their 3,600-peso cash grants for this year. We will accelerate distribution, bringing palpable economic relief to the poorest Filipino families and senior pensioners.
The infrastructure program, for its part, creates new jobs, encourages new businesses and improves accessibility for all our communities. Since the start of the administration, about 9,800 kilometers of roads and 2,700 bridges across the archipelago were constructed, widened, or rehabilitated. We have likewise completed the construction of two international airports.
The centerpiece infrastructure projects of the Duterte administration that we have been building using the government’s own funds are well underway. The Clark International Airport, which is considered as the next premier gateway of the nation, is now 68 percent complete. We look forward to its target operation ahead of schedule by mid-2020.
Meanwhile, the first phase of the New Clark City, which involves the construction of a world-class sports complex, is now 92 percent complete and is targeted to be completed this month. This will be the venue of the Southeast Asian Games to be held in November 2019.
Apart from funding our social services and infrastructure projects, TRAIN also removed the value-added tax on medicines for diabetes, hypertension, and high cholesterol for all Filipinos suffering from these widespread diseases. It lowered the estate and donor taxes to a uniform 6 percent rate to improve compliance as well as free up real estate for productive economic uses.
TRAIN likewise raised excise taxes on petroleum products, which had not been adjusted since 1997 and are disproportionately consumed by higher income households. It also raised excise taxes on cigarettes and introduced taxes on sweetened beverages to encourage less consumption of these products and more consumption of healthier products and reduce the habit of smoking. The World Health Organization praised our efforts for simultaneously scoring for public health and for the economy. The implementation of our sweetened-beverage tax has also earned praise from our ASEAN neighbors. Indonesia and Vietnam have expressed interest on how their respective governments can impose a similar tax as a health measure. In fact, legislators from Indonesia are coming to visit our department starting the 10th of this month.
We are not done yet.
The Rice Liberalization Act produced nearly instantaneous results. It helped bring down rice prices by discouraging speculation and profiteering as well as by ensuring adequate supply. At the same time, it allowed us to build funds for modernizing our agriculture and providing our rice farmers with better access to credit and training. The law also helps us rein in inflation. According to some consumers we have interviewed, good quality rice is now available for only 34 pesos per kilo compared to its former price of 46 pesos per kilo.
The remaining tranches of the comprehensive tax reform program are still in the legislative mill. These include the proposal to reduce our corporate income tax rate to make it at par with the regional average. The reform will encourage more investments in our economy as well as induce better tax compliance.
In turn, we seek to rationalize our incentive program to create a more level playing field for businesses. Some enterprises have been receiving special tax treatment for over 40 years. For instance, in 2017, the government gave away to a select group of companies an estimated 441.1 billion pesos in tax incentives that could have been spent for constructing roads, classrooms or health centers, or to hiring more teachers and health workers. We cannot keep giving away tax incentives indiscriminately and indefinitely, especially if the amount keeps getting bigger and bigger every year. This unfair structure discourages new entrants who could provide better competitiveness in the domestic market. With our reform, we will still offer generous incentives, but they will now be based on performance — how many quality jobs they create; if they invest in the countryside; and if they bring new research and technology to the country that would not have been brought here otherwise.
We also need to pass land valuation reform. This will help local governments collect the right taxes and clear the way for many right-of-way issues that languish in our courts, sometimes for decades, delaying for far too long the efficiency and relief that good infrastructure brings to businesses and commuters.
Finally, we need to pass the financial reform package. This will level the playing field and develop our capital markets to attract more investors to take part in our Build, Build, Build program. Simplifying the tax system in the financial sector will also help lower insurance costs, encouraging more Filipinos to avail themselves of financial protection from loss of life, property and damages incurred from natural disasters.
The bill proposing a general tax amnesty should include the lifting of bank secrecy for fraud cases and the automatic exchange of information among regulatory agencies. This will be helpful in cleaning the slate and bringing us to a more reliable tax regime.
Revenues from the tobacco reform are earmarked to augment the huge funding needed for the Universal Health Care Program. We hope to raise the remaining balance from tobacco taxes with the subsequent enactment of higher excise taxes on alcohol.
Our economic reforms have clearly resulted in more money in the pockets of the Filipino people, while reducing inflation and creating more jobs. We have advanced a number of the game-changing reforms we set out to accomplish at the start of the Duterte administration. If we pass the rest of the reforms in the Zero-to-10 Point Socioeconomic Agenda, we will move even closer to the President’s goal of a comfortable life for every law-abiding Filipino.
The BIR’s digital transformation will translate to more convenient, reliable and transparent services to our taxpayers. It will result in world-class tax administration and provide us more resources for investments on behalf of the Filipino people. The more efficient BIR becomes, the more effective government will be in achieving its goals.
We should also make sure that every taxpayer is treated fairly. We will go after foreign nationals and the employers, such as those in the POGO industry, who fail to withhold and remit their contributions to paying for the public goods and services that we all use and enjoy.
The BIR is leading the charge in the comprehensive effort to make the Philippines a better governed and more prosperous country. I trust all of us here today will deliver our best effort. The entire economic strategy relies on our being able to do so.
Thank you and good day.
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