Comprehensive Tax Reform

Our fiscal performance through the past four years has shown that through efficient tax administration alone, we have come a long way in augmenting revenues. However, in the light of the upcoming ASEAN integration, the desire to boost the Philippines’ competitiveness, and the need to grow a strong middle class through sound and fair economic policy, the DOF welcomes legislative measures to change the tax system, particularly, the review of our income tax structure.

The DOF maintains three main points as its minimum position as we pursue dialogue with legislators on tax reform: that legislation must be holistic, revenue-positive, and equitable so all Filipinos may benefit from a robust fiscal position.

Lowering income tax rates will attract even more foreign investors into the country but will be detrimental to our fiscal health if they are not offset by revenue-generating measures. The DOF believes that revisions to the tax code cannot be done in a piecemeal manner, as the aim is to look at the country’s various revenue-generating measures as part of a single system. For example, lowering rates on one end translates to lowering government capacity to spend on critical investments in public goods and services. Ensuring that all sectors contribute their fair share to public investments like infrastructure and social services is integral to our shared prosperity.

Thus, the DOF firmly believes that any revenue-eroding measure must be compensated by an equivalent revenue-increasing measure. Irresponsibly undermining our country’s revenue-generating capacity today will incur deficits that taxpayers of future generations will have to pay. As a government, we are fully committed to maintaining the fiscal health we have worked hard to regain as a country over the past few years.

From an equity perspective, the DOF believes that measures to change the tax structure in the country must benefit majority of the population. Some proposals give relief to a very thin slice of the population in exchange for billions of foregone revenue, a consequence in terms of foregone public investments that millions of Filipinos cannot afford to lose out on. Any tax policy reform to be passed should correct the tax system in favor of the majority of hardworking Filipinos in the country, rather than the very few high-income earners who do not need as much relief.

The DOF is currently conducting studies with an appropriate approach to tax reform in the country. The DOF and its attached agencies continue to improve tax collection efficiency, continuing a commitment made since the start of this administration to prioritize strengthening tax administration over introducing new taxes.