Members of the Duterte Cabinet have appealed to the Congress to swiftly pass the proposed Comprehensive Tax Reform Program (CTRP) that will empower the government to overhaul the country’s obsolete tax system to make it simpler, fairer and more efficient while raising funds for its unprecedented public investment program.
Seven department secretaries and five undersecretaries have joined Finance Secretary Carlos Dominguez III in expressing their support for the speedy congressional passage of the CTRP’s first package, as featured in House Bill No. 4774 that was introduced by Rep. Dakila Carlo Cua, the chairperson of the House ways and means committee.
The first package of the CTRP was drawn up by the Department of Finance (DOF) and refined by Cua and his House committee, retaining its key features of lowering personal income tax rates, and offsetting the revenue losses from this progressive restructuring by adjusting the excise tax system for automobiles and fuel and expanding the Value Added Tax (VAT) base but retaining exemptions for seniors and persons with disabilities.
Secretaries Ernesto Pernia of the National Economic and Planning Authority (NEDA), Benjamin Diokno of the Department of Budget and Management (DBM), Ramon Lopez of the Department of Trade and Industry (DTI), 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) were one in saying at a House ways and means committee hearing that the CTRP is an indispensable tool in implementing the sweeping reforms that President Duterte has pledged to make growth truly inclusive under his administration.
Pernia said the “NEDA has full and unqualified support for the tax package.”
“In fact, we were closely consulted by the Finance Department when it was crafted. So there’s really no misgiving or any kind or reservations we would have on the tax package,” Pernia said.
Diokno said tax reform is crucial “in order to make us competitive and in order to make the Philippines an attractive place to invest in.”
He pointed out that the Philippines cannot compete under a high-tax regime if its neighbors like Hong Kong are offering corporate tax rates at only 15 percent, and Singapore at only 17 percent.
“Also, we want to reform the personal income tax system because it’s long overdue, we’re taxing one-third of the income of our people, and that has to be adjusted for fairness,” Diokno said.
Briones, who is a former National Treasurer of the Philippines, said that raising additional revenues through the CTRP is the best way to deal with deficit spending.
“It is said, Mr. Chairman, in the books that if a deficit is impending, there are three ways to treat it. One is to reduce expenditures. We would not recommend a reduction of expenditures because of the demands for development services, Briones said.
“The second is to borrow, and the third is to increase revenues. We are opting for an increase in revenues to be able to cope with the increased levels of expenditures, which the development plan of the government is aspiring for. as well as the Filipino people,” she added.
She said that the 25 million students under the care and responsibility of the DepEd, which employs 700,000 employees, including 674,000 teachers, require “increased levels of funding support” especially now that the Department is introducing Grade 12 in the public high school system.
Villar said the CTRP has his “full and unequivocal support,” given that it is a necessary instrument in sustaining the high spending of the DPWH and other agencies for infrastructure, which for this year, is equivalent to around 5.3 percent of the Gross Domestic Product (GDP).
“It would not be prudent or sustainable to spend at this rate without a corresponding tax measure,” Villar said. “I hope that Congress would likewise see that this tax measure is something that we must pursue in order to reach our next level of economic growth.”
Tugade told lawmakers during the hearing that the DOTr “manifests its unconditional support to the comprehensive tax program.”
“Napag-aralan ho, pinasadahan namin sa madaming repaso at pag-aaral. Ang masasabi ko lang po, kagalang-galang na members of Congress, kailangan po natin ito (This was studied and reviewed many times. And what I can say, our highly respected members of Congress is that we need this,” Tugade said of the CTRP.
Lopez said the DTI “fully support[s] the Comprehensive Tax Reform Program.”
“We’ve been conferring with the Department of Finance to reflect only certain fine-tuning of the contents of the tax reform program,” Lopez said. “But in general, we fully support the provisions in the tax reform program.”
On behalf of the Department of Health (DOH), Undersecretary Dr. Lilibeth David expressed the agency’s support for the CTRP and said that more than a tax reform package, it is also “one of the health policies for our built environment because it will help us to reduce or manage the number of automobiles on the roads and the carbon emissions.”
“And this will reduce our top five causes of disease and also mortality–that’s cardiovascular, respiratory, among others, and even injuries and accidents. It will amount to a substantial amount of money that will be [saved] in health expenses,” Dr. David added.
Dominguez said that the CTRP “will enable us to reshape our economic growth to make it more inclusive,” bring the country to “the irreversible path towards being a high-income economy in one generation” and lower the poverty rate to a mere 14 percent by 2022.”
“If we choose to do only what is popular, that is reducing tax rates alone, without passing the revenue-offsetting measures, the scenario will be dire: we court the possibility of a credit rating downgrade as we are forced to rely on borrowing to manage the deficit,” Dominguez said.
Dominguez said that passing only the reforms in personal income taxes without the corresponding revenue-offsetting measures would translate “into P30 billion in additional borrowing costs per year for the government.”
“Our consumers will have to absorb the consequences of a permanent peso depreciation along with a 2-percent increase in interest rates,” he added.
“There will be hundreds of millions less in what is available for classrooms, barangay health centers, and rural road networks. If we fail to pass the revenue-enhancement measures, we will lose the growth momentum that took us years to build,” Dominguez said.
Failing to pass the CTRP as a package, he said will lead to “large budget deficits and move the country closer to a debt crisis.”
Also, present during the hearing to represent other Cabinet members were Undersecretaries Noel Leyco of Department of Social Welfare and Development (DWSD), Garry de Guzman of DOTr, Laura Pascua of DBM and Annalyn Sevilla of DepEd.
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