The Comprehensive Tax Reform Program (CTRP) is needed to accelerate poverty reduction and to sustainably address inequality, in order to attain the President’s promise of tunay na pagbabago. By making the tax system simpler, fairer, and more efficient, additional – and a more sustainable stream of – revenues will be generated to make meaningful investments in our people and infrastructure, which will help achieve our vision for the Philippines.
What we want for Filipinos
By 2022:
Reduce poverty rate from 22% to 14%, which translates to some six million Filipinos lifted out of poverty
Realize a law-abiding country
Achieve peace within the nation and with our neighbors
Graduate to upper middle-income country status
By 2040:
Eradicate extreme poverty
Establish inclusive economic and political institutions where everyone has equal opportunities
Achieve high-income country status
The Philippines’ macroeconomic fundamentals are good, thanks to prudent macroeconomic fiscal management by the current and previous administrations. With tax reform, we can further strengthen our macroeconomic position to create an environment more conducive to high growth and investment, strong job creation, and faster poverty reduction.
The vision for the Philippines
By 2022, we aim to reduce the poverty rate from 21.6% to 13-15%. This means that six million Filipinos will be lifted out of poverty. 23 years after or one generation from now, we aim to eradicate extreme poverty.
The increase in Gross National Income (GNI) will increase to 5,000 USD from 3,500 by 2022.The Philippines will achieve upper-middle income status, which is where countries like Thailand and China are today. In 2040, GNI will further increase 11,000 USD and the Philippines will achieve high-income status, where Malaysia and South Korea today.
How do we get there?
To achieve this, we have to sustain economic growth of at least 7% every year for one generation, shift the source of growth from consumption to investment, and massively invest in the Filipino people to become globally competitive, and in infrastructure to increase productivity.
We also have to focus our investments in health, education, life-long training, social protection, infrastructure, and research and development.
Dramatic fiscal turnaround but much more needed to move from stability to prosperity.
Impact on the economy
If we only pass the popular reforms, we risk our current macroeconomic stability. Rating agencies have warned against the stalling of the tax reform and a possible downgrade. Tax reform will allow the government to invest in the Filipino people through infrastructure, education, health, housing, and social protection.
Fears of spikes in inflation are unfounded. Inflation will still be within the 2-4% target of the Bangko Sentral ng Pilipinas, and monetary policy tools can be used to target inflation.
Spurs economic growth
The Comprehensive Tax Reform Program will help the economy grow by 1.3% by 2022. GDP will be boosted as a result of higher household consumption due to lower income tax and the cash transfers. Increased economic activity will be buoyed by increased household consumption and higher investments.
Inflationary impact managed
Increase in inflation is low and within the BSP’s target range. The increase in excise taxes will raise inflation by .42% in 2018, but will quickly dissipate in succeeding years.
Creates jobs
Package 1 will create about half a million jobs over the next half-decade and could lift up to 250,000 Filipinos out of poverty over the same period.
Package 1 can generate PHP 134 billion. If at least half of that is invested in infrastructure, 67,000 jobs can be directly generated in construction, and almost 70,000 jobs can be created in the rest of the economy, for a total of 137,000 jobs. All packages, meanwhile, can generate PHP 309 billion. This implies that a total of 315,000 jobs can be created in the economy. Tax reform will enable us to realize the Build, Build, Build program to be realized. Estimated to cost PHP 8.4 trillion, the program can create around 17 million jobs over the implementation period. Even at only 50 percent implementation, the program can create more than 8 million jobs over its life.
