Over 200 representatives of nongovernment organizations and other civil society groups have called on the two chambers of the Congress to “swiftly pass” a proposed legislation covering the first package of the Comprehensive Tax Reform Program (CTRP), which, they said, would spell the long-overdue correction of the country’s tax system and complement initiatives for transparency and participatory governance leading to sustainable growth and development.
They belong to an umbrella group—the Open Government Partnership (OGP)–consisting of 66 people’s organizations, civil society and academic groups, public sector unions and business chambers who attended the two-day Open Government Dialogues, which was organized by the Departments of Budget and Management (DBM) and of Finance (DOF) with the support of the United States Agency for International Development (USAID), Union of Local Authorities of the Philippines (ULAP) and other groups.
“We appeal to the members of the House of Representatives and the Philippine Senate to swiftly pass this legislative measure to help generate more revenue that will finance investments on the people through health, education, infrastructure, and social protection programs,” said these OGP members in a manifesto of support issued at the end of the “Open Government Dialogues” held this week at the Philippine International Convention Center (PICC) in Pasay City.
“We believe that the correction of the tax system, which has been long overdue, will complement initiatives for transparent and participatory governance in order for the country to achieve the country’s sustainable development goals,” they said in their manifesto.
They said that “Tax reform will go hand in hand with budget reforms, including the allocation of more resources to infrastructure, education, health, and social protection.”
“The adjustment and re-bracketing of personal income tax rates will give relief to our overburdened taxpayers, and make the tax system more equitable,” they said. “Increased excise taxes on oil products, automobiles, and sugar-sweetened beverages will regulate consumption or behavior that has costs to society, help communities be healthier, and fetch the much-needed revenue to finance the goals of sustainable development.”
They further said that “Rationalization of the Value-Added Tax Exemptions will make the indirect tax efficient and less prone to corruption and abuse.”
Prior to this Luzon-wide dialogue, the Philippine Chamber of Commerce and Industry (PCCI) and USAID have jointly hosted tax reform roadshows in the provinces of Pampanga, Palawan, Cebu, Bohol, Davao and Cagayan De Oro to inform the public of the benefits of the DOF-proposed CTRP and gather their inputs on how to further fine-tune this tax reform plan now pending in the Congress.
The House is set to start plenary discussions next week on the substitute bill, House Bill No. 5636, which its Committee on Ways and Means passed last May 15 after consolidating the original measure endorsed last year by the DOF—House Bill No. 4774—with 54 tax-related bills in the chamber.
Finance Secretary Carlos Dominguez III said that under President Duterte’s “economic breakout” strategy, tax reform will play a crucial role in fulfilling the government’s goal of transforming the Philippine economy to a high middle income one by 2022 and reducing poverty incidence to just 14 percent by that time.
If this strategy focused on inclusive growth is sustained over the medium term, the government envisions the Philippines to be a high-income economy in one generation or by 2040, Dominguez said.
According to DOF Undersecretary Karl Kendrick Chua, “significant progress” has been achieved with the substitute bill’s passage by the House ways and means committee chaired by Quirino Rep. Dakila Carlo Cua, and expressed the hope that the House could approve it at the plenary level before the Congress’ sine die adjournment this June.
Chua said at the PICC event that the DOF will try to convince the House to restore the original provisions of HB 4774 in lieu of the “moderate modifications” that were adopted in the substitute bill that is up for plenary discussions next week.
Once the House approves the substitute bill on third and final reading, it will refer this measure to the Senate for its own discussions and approval.
The House panel gave its provisionary approval to the still unnumbered substitute bill last May 3 by a 17-4 vote with three abstentions and then referred it to the House committee on appropriations for earmarking the funding provisions.
Cua’s committee gave its final approval last May 15 after the bill was returned to it by the House appropriations panel headed by Rep. Karlo Alexei Nograles.
Chua said the progressive features of HB 5636 will benefit the poor and will pass on most of the burden of consumption taxation to the rich.
Under the bill, the price impact of the revenue reform measures will be “small to moderate,” with inflation rising by a maximum of 0.9 percentage points and the increase in prices of food, transport, and freight charges only minimal, he said.
“Just last year, oil prices increased by up to P14 over the 2016 period, yet we did not see prices skyrocketing. The price impact of the slight increase in fuel excise taxes under the CTRP is not a cause for concern,” Chua said.
This bill aims to lower personal income tax (PIT) rates while broadening the tax base through reforms in consumption taxes such as the Value Added Tax (VAT) and the excise taxes on automobiles and fuel.
It was co-authored by some 100 congresspersons, 25 of whom chair House committees.
Chua said that contrary to misleading claims made by some quarters, the substitute bill is actually pro-poor because the additional revenues that would be collected under this bill will be spent on job-generating infrastructure projects and programs on education, health and other forms of human capital development that will help low-income Filipinos improve their living standards.
As for the proposal by some groups to approve only the CTRP provisions on lowering PIT rates, Chua said “this would not only be fiscally irresponsible but also anti-poor” because the revenue losses arising from the reduced tax take would leave the government with insufficient funds for education, health, and social protection–programs designed to lift the bottom 50 percent of the population from poverty.
A reduced tax take would also lead to a collapse in internal revenue allotments to local government units (LGUs) three years down the road, he said.
He urged lawmakers to view the CTRP as a package so that the bill can truly realize its ultimate objective of benefiting 99 percent of Filipinos.
“Tax reform is really about investing in every Filipino’s future. We need tax reform because we want all Filipinos to rise above poverty and be prosperous by 2040. The business-as-usual scenario of just doing a little is no longer acceptable given our huge investment gaps,” Chua said.
“We need the incremental revenues from tax reform to increase spending on health, education, social protection, and infrastructure These basic needs and services are most needed in rural areas where poverty is the worst,” he noted.
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