The Department of Finance (DOF) said a consensus-building approach has enabled the Duterte administration to refine the tax reform package it has originally submitted to the Congress, taking into account the valuable inputs given by lawmakers and the concerns of would-be affected stakeholders.
On behalf of the DOF, Finance Undersecretary Karl Kendrick Chua thanked the members of the House ways and means committee led by Quirino Rep. Dakila Carlo Cua, who shepherded eight hearings on the first package of the administration’s Comprehensive Tax Reform Program (CTRP).
The CTRP’s first package, outlined in House Bill No. 4774 authored by Cua, aims to lower personal income tax rates and, at the same time, adjust excise taxes on fuel and automobiles and broaden the value-added tax base but retaining exemptions for seniors and persons with disabilities (PWDs)
HB 4888 filed by Albay Rep. Joey Salceda, the senior vice chairperson of the ways and means committee, complements HB 4774.
HB 4774 is a modified version of the DOF’s original proposal.
Chua said that among the changes that were incorporated into the Cua bill include: retaining the VAT exemptions for seniors and PWDs, which will be complemented by a national ID system to ensure that such privileges reach the target beneficiaries; staggering the proposed fuel excise tax adjustments over a three-year period; keeping the tax-exemption status of the first P82,000 in the 13th month pay and other bonuses of compensation earners; and fine-tuning the proposed excise tax rates for automobiles.
“Because of this, the honorable committee has decided to proceed and hear the bill, which is now going through eight hearings, and we are very thankful,” Chua said at the last hearing held by the House ways and means committee on the proposed tax reform bill.
Before the Lenten break of the Congress, the Cua-chaired House committee already agreed in principle to tackle the CTRP bill as a package, putting to rest concerns that the Congress might abandon the revenue-generating measures of the proposal and only pass the revenue-eroding portion, particularly the lowering of income tax rates.
“I would like to highlight that this important tax measure is really best seen as a package because that is where 99 percent of Filipinos will really benefit,” Chua said.
“Not only is the reduction of income tax going to give us a substantial increase in disposable income to the Filipino people, the broadening of the VAT base and the increase in the oil and automobile excise will actually — contrary to public perception — improve the progressivity of the tax system,” he added.
He said the tax reform package’s broader goal of raising revenues to fund the Duterte administration’s unprecedented investments in infrastructure, health, education, and social protection for the poor is the key that would open doors of opportunities for millions of Filipinos to rise above poverty and in turn, transform the country into a high middle-income economy by 2022 and to a high-income one by 2040.
“This is really about seeing this package as an investment in our future. We would like to see poverty eradicated in one generation, our country becomes a high-income country in one generation. And this requires a lot of investment, a lot of contribution and maybe some initial sacrifice,” Chua said.
Chua said that instituting tax reform would “bring this country to an irreversible path of inclusive growth” and shield the economy from external shocks, like what happened 13 years ago, when the then-Arroyo administration implemented reforms in the VAT system (R-VAT).
“We have managed to double our GDP and triple our per capita income in just 15 years because of this important (R-VAT) reform. We survived the economic crisis, the slowdown, the food, and fuel crises in 2008 because of this important reform that the previous Arroyo government (implemented) and Congress had to pass despite being initially unpopular,” Chua said.
Chua told the lawmakers that the failure to pass the tax reform package “would court the possibility of a credit rating downgrade, which would actually worsen our position, the hard-fought gains that we have achieved in the last 15 years.”
Finance Secretary Carlos Dominguez III has pointed out 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 of 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,” he said.
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, said Dominguez 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.
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