Economist-lawmaker lauds first 2 tax reform packages

Date Posted : September 24, 2018

Economist-lawmaker lauds first 2 tax reform packages

Date Posted : September 24, 2018

The first two packages of the Duterte administration’s comprehensive tax reform program (CTRP) are among the best ever crafted as these measures would help redistribute wealth among Filipinos, sharpen the competitiveness of Filipino workers and corporations, and enhance the investment narrative of the Philippines, according to a top economic expert and lawmaker from the House of Representatives.

Albay Representative Jose Ma. Clemente Salceda, a senior vice chairperson of the House appropriations committee, said the “egalitarian” characteristics of the first tax reform package are adequately demonstrated by the lower personal income tax (PIT) payments of P179.427 billion for the first seven months of 2018, or a reduction of P47.646 billion from P227.073 billion during the same period of the previous year.

The CTRP’s Package 1–the Tax Reform for Acceleration and Inclusion Act (TRAIN)–translated into hefty personal income tax (PIT) cuts for individual taxpayers, and “is among the most finely architectured tax policies ever in this country, and possibly the most egalitarian tax strategy ever that I have seen and studied as an analyst,” said Salceda, an economist and former governor of Albay.

Salceda sponsored the proposed P18.68 billion budget for next year of the Department of Finance (DOF) during last week’s plenary deliberations on House Bill No. 8169 or the proposed P3.757 trillion General Appropriations Act for 2019.

As for the second tax reform package that aims to lower the corporate income tax (CIT) and modernize fiscal incentives, Salceda said the House’s approval on the third and final reading of this measure—the Tax Reform for Attracting Better and Higher Quality Opportunities (TRABAHO) bill–makes it “one of Asia’s most attractive incentive packages” for private enterprises.

He said the TRABAHO bill approved by the House would lead to immense multiplier effects in the form of more jobs, investments and additional capital equipment

“I am pretty bullish and confident that (TRABAHO) actually will change the investment narrative of the Philippines to one beyond the inflation cycles,” said Salceda.

The lawmaker said he “subscribes to the entire sequence of reforms” drawn up by the economic managers of the Duterte administration because its “overall logic essentially is to make the country—both our labor force and our corporate sector more competitive.”

He said correcting the disorganized fiscal incentives system under the TRABAHO bill would ensure that only enterprises that deserve tax incentives are granted these perks.

“Just to put numbers. In the P301 billion (in foregone revenues because of tax incentives) that were computed in 2015, out of that, almost 60 percent, to be exact 54 percent are redundant incentives. We are giving it to corporations who don’t need it and would have been here anyway even without it,” Salceda said.

Salceda said both Packages 1 and 2 were designed to lower taxes to make these on the par with the regional average.

He said the incremental revenues from the revenue-enhancing measures of Package 1 would generate more funds for the government to spend on roads, education, and health care.

“I still take it from a fiscal economist, (Dr.) Chat (Rosario) Manasan (of the Philippine Institute of Development Studies). For as long as the government spends on roads, education, health, the net fiscal incidence, wherever you got the money from, for as long as they are not egregiously obnoxious, they are net positive to the poor,” Salceda said.

Salceda raised these points when he was interpellated in succession by Minority Leader Danilo Suarez and Representatives Mark Go, Antonio Tinio, and Ariel Casilao during his sponsorship of the DOF budget.

According to Finance Secretary Carlos Dominguez III, TRAIN will provide a steady revenue stream to fulfill the Duterte administration’s goal of high and inclusive growth anchored on accelerated spending on human capital development and on an unprecedented infrastructure buildup via the $170-billion “Build, Build, Build” program.


Date Posted September 24, 2018

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