Finance Secretary Carlos Dominguez III has commended the Bureau of Internal Revenue (BIR) for “leading the charge” to bring the real change of better lives that Filipinos have long yearned for, and which President Duterte vowed to deliver early on in his term.
Dominguez said the reforms put in place by the Duterte administration over the last three years to make the tax system simpler, fairer and more efficient, along with improvements in tax administration to reduce the margin of discretion and upgrade the bureau’s quality of service, have vastly enhanced the revenue performance of the BIR.
On top of raising the country’s tax effort to the unprecedented level of 14.7 percent last year, Dominguez noted that the BIR’s “commendable” collections from January to June 2019 amounted to P1.07 trillion, which is 95 percent of the goal set for that period.
Dominguez said the bureau’s enhanced performance, made easier by modernizing tax policies under the first package of the Comprehensive Tax Reform Program (CTRP) enabled the government to maintain fiscal discipline despite its massive spending on infrastructure, which has created more jobs; expanded social services that include cash transfer programs for the poorest families, free tuition in State Universities and Colleges (SUCs), and universal health care (UHC); and improvements in the country’s defense and public safety capabilities.
“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,” said Dominguez during the BIR’s 115th anniversary program, held Thursday at the Philippine International Convention Center (PICC) in Pasay City.
Dominguez said the BIR is gearing up to collect “in the trillions” of pesos to meet the vast requirements of the Duterte administration’s unmatched public investments in infrastructure and human capital development, which the economy needs to continue expanding rapidly and lifting Filipinos from poverty.
This task, he said, is made easier with the modernization of tax policies as shown with the passage of the CTRP’s first package—the Tax Reform for Acceleration and Inclusion (TRAIN) Act—that made possible the collection of far bigger revenues while increasing the people’s purchasing power via sizable personal income tax (PIT) cuts for 99 percent of all wage earners.
TRAIN also removed the value-added tax (VAT) on medicines for diabetes, hypertension, and high cholesterol for all Filipinos suffering from these widespread diseases and 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.
Higher revenues from TRAIN also enabled the government to speed up the rollout of the “Build, Build, Build” infrastructure modernization program, which has created more jobs; encouraged the opening of new businesses; and resulted, thus far, in the construction, widening or rehabilitation of 9,800 kilometers of roads and 2,700 bridges plus the completion of two international airports since the start of the Duterte administration, Dominguez said.
He also cited the centerpiece infrastructure projects of the Duterte administration—the expansion of the Clark International Airport (CIA), which is now 68 percent complete; and the development of New Clark City, where a world-class sports complex is already 92 percent complete in a runup to Manila’s hosting of the Southeast Asian Games in November as among the initial results of “Build, Build, Build” made possible by TRAIN and the BIR’s much-improved performance.
Higher revenue collections were from the adjustments in the excise taxes on petroleum products that have remained unchanged since 1997, the increase in cigarette taxes, and the new tax on sugar-sweetened beverages (SSBs), which has earned praise from the Philippines’ Association of Southeast Asian Nations (ASEAN) neighbors as a good health measure.
TRAIN also made possible the distribution of unconditional cash transfers (UCTs) to the country’s poorest households, with 3.6 million beneficiaries having received already their P3,600 cash grants for this year, Dominguez said.
“We will accelerate distribution, bringing palpable economic relief to the poorest Filipino families and senior pensioners,” he added.
The BIR’s performance also allowed the government to maintain fiscal discipline while increasing spending, which led to a credit rating upgrade of “BBB+” for the country, the highest it has ever obtained. This higher investment grade rating means the government, the business community and enterprising Filipinos can borrow more cheaply to invest and create more jobs, Dominguez said.
“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,” Dominguez said.
With these positive developments along with welcome news of unemployment numbers falling to historic lows last year, Dominguez said the government remains on track to sustain a gross domestic product (GDP) growth rate of above 6 percent in 2019 and the succeeding 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,” he said.
Besides TRAIN, Dominguez also cited the reforms instituted to liberalize rice trading, which has ensured adequate supply of the staple, discouraged price speculation and profiteering, and thus led to lower inflation and rice prices. Consumers themselves have pointed out that good quality rice is now available for only P34 per kilo compared to the previous rate of P46, Dominguez noted.
“At the same time, (the Rice Liberalization Law) allowed us to build funds for modernizing our agriculture and providing our rice farmers with better access to credit and training,” Dominguez said.
Dominguez said the remaining tranches of the CTRP need to be approved by the Congress and implemented soonest so the government could “move even closer to the President’s goal of a comfortable life for every law-abiding Filipino.”
He cited, in particular, the second package of the CTRP that aims to lower the corporate income tax (CIT) rate and rationalize investment incentives to encourage new investors who could provide better competitiveness in the domestic market.
Dominguez pointed out that some businesses have been receiving special tax treatment for over 40 years. As a result of this unfair system, the government gave away to a select group of companies an estimated P441.1 billion 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,” Dominguez said. “With our reform, we will still offer generous incentives, but they will now depend 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.”
Dominguez also said reforms in the land valuation system, which will help local governments collect the right taxes and resolve many right-of-way (ROW) issues; and simplifying the complex tax rates in the financial sector to lower, among others, insurance costs for Filipinos, and develop the capital markets to attract more investments, also need to be passed by the Congress soon.
He also underscored the need for a general tax amnesty that should include the lifting of bank secrecy for fraud cases and the automatic exchange of tax information among regulatory agencies.
“This will be helpful in cleaning the slate and bringing us to a more reliable tax regime,” Dominguez said.
Dominguez said the BIR’s ongoing digital transformation will translate into “more convenient, reliable and transparent services to our taxpayers” and “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,” he said.
He also pointed out that the BIR should ensure that every taxpayer is treated fairly by going after foreign nationals and their employers, such as those hired by Philippine Offshore Gaming Operators (POGOs), “who fail to withhold and remit their contributions to paying for the public goods and services that we all use and enjoy.”
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