Thank you for inviting me to this meeting of the most distinguished public relations practitioners in the country. I am guessing that I have much more to learn from you than you might learn from me.
Public relations is synonymous with public diplomacy. It involves presenting a product or a company (or, for that matter, a candidate) in its best light. That requires identifying a public need for which the product or company is the answer. The end goal is to build public sympathy for whatever the public relations practitioner represents.
The Department of Finance is surely an entity direly in need of public sympathy. Our main “product” is the delivery of sufficient revenues for government to do its job effectively. Our main tool is taxes — which everybody hates but which we cannot do without.
We have to deliver our service in a pretty hostile environment. It is a biosphere inhabited by politicians who find political profit in giving away tax exemptions of every imaginable variety, populist groups that equate every revenue measure as a form of oppression and highly talented accountants skilled in the dark arts of tax avoidance. It is never easy to navigate through this hostile environment.
In this new administration, the DOF is tasked with what might seem like impossible goals. We are committed to bringing down corporate and individual income tax rates to put them at par with the rest of the region. At the same time, we need to raise an additional P800 billion to fund an urgent infrastructure program, expand programs of social inclusiveness and bring down poverty rates to more civilized levels.
The economic development program of this administration is anything but timid. With a strong boost in public spending, we will try to maintain a GDP growth rate of 7% or better into the medium term. Much of the spending will be focused on building direly needed infrastructure. With better infra and logistical systems, we should be able to bring down our costs of production so that we become a competitive economy. This, in turn, will enable us to shift from consumption- to investment-led growth.
There are many virtues in investment-led economic expansion. To begin with, it creates quality jobs — the most effective instrument in bringing down poverty. It is internally sustainable and more inclusive. Investment-led growth does not just happen, however. Government will have to prepare the groundwork for that, building world-class infrastructures and investing in a world-class labor force.
President Duterte’s economic agenda seeks to bring the country to high middle-income status by 2022. It seeks to revive our agriculture, hobbled by land scarcity and backward farm systems. At the minimum, we seek to triple tourism arrivals during this period. All these goals however require a tremendous amount of political will and a tremendous amount of money available to support government programs.
The DOF has crafted a tax reform program and submitted this to the Congress for legislation. It is a reform program intending to make our tax system simpler, fairer and more efficient. It involves broadening the tax base, closing loopholes in the VAT system and introducing a number of excise tax instruments guided by the need to make our tax system more progressive.
The tax reform program is strongly supported by the business community, the foreign chambers of commerce, the community of economists and fiscal policy experts, and by all our multilateral development partners. All those who understand the vital link between a strong fiscal position and a truly inclusive pattern of development cheer this tax package as they would a passing rock star. That is all very encouraging.
However, we still have to impress two specific groups: the legislators who will expend some political capital enacting the tax reform package into law and the populist groups eager to seize every tax measure as a rich opportunity to agitate in the streets. Some more work has to be done here.
The usual excuse of legislators for not supporting tax legislation is that the amount to be collected could be raised by tightening on tax administration. Anticipating that, we have tightened tax administration early on. As much as we can, within the framework of prevailing laws, we have simplified processes and improved discipline in our main revenue agencies. As a result, both the BIR and the BOC have performed well, with the Customs Bureau actually exceeding targets in the fourth quarter.
The greater task is to build public support for the tax reform package, especially from wage earners. We need to help the ordinary citizen understand how critical the tax reform package is to finally making the turn from exclusive to inclusive economic development, from moderate to high-growth rates and for bringing down levels of extreme poverty to the lowest ever.
This is a fortuitous moment. Interest rates remain relatively low and conducive to investments. The oil price regime is expected to remain moderate. A large demographic wave of young Filipinos are about to enter the workforce, expecting a dynamic economy that will have jobs for them and space for their dreams.
There is no other way to state the urgency of passing the tax reform package at the soonest than to say we are at a Cinderella moment today. If we do not seize this rare opportunity to break the old cycle of high poverty, poor infrastructure and low growth, we will condemn the next generations to the past we want to leave behind.
I seek your support and expert pro bono advice on this. Again, thank you for this opportunity to meet with you today and all the best in what you do.