Seven Cabinet Secretaries and five undersecretaries came in full force at Monday’s hearing of the House ways and means committee on the proposed Comprehensive Tax Reform Program (CTRP) to demonstrate their unequivocal support for this highly progressive and ambitious plan that aims not only to make the country’s outdated tax system simpler and fairer but also to set the Philippines off to the “irreversible path” of becoming a high-income economy in one generation or by 2040.
Attending the hearing were Secretaries Carlos Dominguez III of the Department of Finance (DOF), Benjamin Diokno of the Department of Budget and Management (DBM), Ramon Lopez of the Department of Trade and Industry (DTI), and Ernesto Pernia of the National Economic and Development Authority (NEDA).
Secretaries who were also present at the seventh tax reform hearing of the Cua-chaired committee to express their 100 percent support for the CTRP were Secretaries Arthur Tugade of the Department of Transportation (DOTr), Mark Villar of the Department of Public Works and Highways (DPWH), and Leonor Briones of the Department of Education (DepEd).
Also in attendance were Undersecretaries Dr. Lilibeth David of the Department of Health (DOH), Noel Leyco of Department of Social Welfare and Development (DWSD), Garry de Guzman of DOTr, Laura Pascua of DBM and Annalyn Sevilla of DepEd.
Commissioners Caesar Dulay of the Bureau of Internal Revenue and Nicanor Faeldon of the Bureau of Customs was also present at the hearing.
The heads of the DepEd, DOH, DSWD, DPWH and DOTr were invited to the hearing because their respective departments are the key beneficiaries and implementors of the priority programs to be funded by the proposed CTRP, which aims to raise an extra P1 trillion each year for the rest of the Duterte watch so it could carry out an unprecedented level of public spending on infrastructure, human capital and social protection for the poor and other underprivileged sectors, in keeping with the government’s high–and inclusive–growth agenda.
“We are joined today by key members of the president’s Cabinet,” stressed Dominguez in his statement at the start of the public hearing. “This is a vivid demonstration of support for the tax package that is the keystone to the whole range of reforms this government intends to accomplish over the medium term.”
Dominguez said that “We lay the President’s comprehensive tax reform package before the people’s representatives, confident that you will see it in its best light and understand the urgency to legislating it to life.”
‘The comprehensive tax reform package we bring before you have been endorsed by the business associations, the foreign chambers of commerce, our multilateral development partners, the former secretaries and undersecretaries of finance and many other civil society groups,” he said. “This is the tax package that will enable us to reshape our economic growth to make it more inclusive. It is the tax reform package that will bring us to the irreversible path towards being a high-income economy in one generation and bring down our poverty rate to a mere 14% by 2022.”
He noted that “If we fail to raise the volume of revenues required for our economy to break out over the next few years, we will fail in everything else. We will fail to close the infra gap. We will fail to make the investments in our young to prepare them for meaningful economic participation. We will fail to catch up with our neighbors in the region who have invested twice the amount than what we did on infra over the past three decades. Most important, we will fail to bring down the level of poverty afflicting our people.”
“Our tax system itself is direly in need of reform. Our personal and income tax rates are much higher than the rest of the region. We need to bring them on par to be competitive for investments. Unjustly high tax rates are nearly an invitation for evasion. By lowering tax rates to the regional environment, we hope to attract even more investments to sustain a higher growth rate,” he said.
The finance secretary told the lawmakers that, “This is our economy’s golden moment. If we fail to seize it, the conjuncture of opportunities will pass us and we will betray our people. We cannot afford to lose because of indecision or because we failed to act boldly.”
The proposed CTRP will allow the government to build or improve 44,000 kilometers of national and local roads, construct more local hospitals and improve existing ones, attain 100 percent PhilHealth coverage, and achieve the ideal teacher-to-student and student-to-classroom ratios for the benefit of the country’s future workforce, according to Dominguez, who led the Cabinet in urging the 17th Congress to pass in its first regular session the first package of the CTRP.
Moreover, some P48 billion will be earmarked for targeted transfer programs for low-income groups and other vulnerable sectors to shield them from the initial impact of the CTRP, he said.
Package One of the CTRP is outlined in HB No. 4774, the bill authored by Cua that aims to lower personal income tax rates for 99 percent of the country’s taxpayers while expanding the value-added tax (VAT) base and adjusting rates for consumption taxes such as the excise tax on petroleum products and automobiles, among other revenue-enhancing measures. VAT exemptions for seniors and persons with disabilities will be retained under the bill.
With the approval and implementation of the tax reform bill, the DepEd would be able to construct 113,553 more classrooms and hire 181,000 more teachers for the public school system over the next five years if the full CTRP is implemented.
The CTRP will help attain 100% PhilHealth coverage, build 25 more local hospitals and upgrade 704 existing ones, on top of also improving 263 rural and urban health centers, constructing 8,412 new barangay and rural health centers; hire an additional 2,424 doctors, 39,466 nurses, 2,862 medical technologists, 1,090 dentists, 911 public health associates, 2,497 Universal Health Coverage implementers, 6 more midwives, and 3,288 pharmacists between 2017 and 2022.
Among the projects to be funded by the CTRP are the Bonifacio Global City-Ortigas Center Link Road Project, UP-Miriam-Ateneo Viaduct along C-5/ Katipunan Avenue, Metro Manila Priority Bridges Seismic Improvement Project (Guadalupe Bridge and Lambingan Bridge), and the Widening/Improvement of Gen. Luis St.-Kaybiga- Polo-Novaliches Road.
The following projects are also in the pipeline: Panay-Guimaras-Negros LinkProject, EDSA-Taft Flyover, C-2 (Gov. Forbes St.)/R-7 (Espana St.) Interchange Project, Circumferential Road 3 (C-3), Southern Segment from N. Domingo St. in San Juan City to Buendia Avenue in Makati City, C-5 Kalayaan – Bagong Ilog Improvement Project, and Dalton Pass East Alignment Alternative RoadProject.
The other projects to be funded by the CTRP are the Arterial (Plaridel) Road Bypass Project Phase III, Central Luzon Link Expressway, Phase II in San Jose, Nueva Ecija, Pasig-Marikina River Channel Improvement Project, Phase IV, MarikinaDam, Flood Protection Works in the Marikina River including Retarding Basin, Flood Mitigation Project in the East Mangahan and the Floodway Area (Stage 1) and several major flood control projects.
Dominguez said that unless the government seizes the moment and mounts an unmatched infrastructure program that would make our economy far more competitive, favorable economic trends sweeping the region will once again bypass the Philippines.
He said the CTRP is necessary to realize the Duterte administration’s medium-term goal to reduce poverty incidence from 21.6 percent in 2015 to 14 percent by the end of the President’s term in 2022, and to bring the country to high-income status by 2040, when extreme poverty will have been eradicated and per capita gross national income is at least $11,000, or where Malaysia is right now.
“On one hand, we find the economy lifted by benign global interest rates, a prolonged period of reasonably priced oil, strong macroeconomic fundamentals, and a robust fiscal position,” he said. “With sufficient public spending on direly needed infrastructure, we could easily achieve a 7% growth rate and sustain that well into the medium term. That will bring our economy to a high middle-income status in six years. Economists call this the Philippine economy’s ‘Cinderella moment.’”
“On the other hand,” he added, “we are seeing the onset of what economists, in turn, refer to as a “demographic sweet spot.” A large number of young Filipinos are preparing to enter the workforce. We need to invest in their skills and ensure they are globally competitive. We likewise need to ensure they find meaningful employment in an inclusive economy or face an alienated and disgruntled generation. If we fail to provide quality education and then fail to provide ample job opportunities, the next generation of Filipinos will condemn us.”
“At this moment, the state needs to do a number of things simultaneously to turn this juncture into a golden opportunity for our people,” he said. “We need to invest in education and public health care to prepare our young for the future. We need to close the infrastructure gap that has historically kept our production costs high, relative to that of our neighbors. For this, we need to provide the state with ample revenues to keep our domestic economy abreast with the rest of our region.”
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