Former DOF secretaries, eminent economists join top legislators in seeking urgent passage of remaining tax reform packages

Date Posted : September 19, 2019

Former DOF secretaries, eminent economists join top legislators in seeking urgent passage of remaining tax reform packages

Date Posted : September 19, 2019

Former secretaries of the Department of Finance (DOF) and eminent economists have expressed strong support for the urgent passage of the remaining packages of the Duterte administration’s Comprehensive Tax Reform Program (CTRP) to help fulfill its goal of reducing poverty incidence from 21 percent to just 14 percent within the next three years.

They manifested their support through a joint statement signed after a lunch meeting last week with Finance Secretary Carlos Dominguez III; Senator Pia Cayetano, who chairs the Senate committee on ways and means; and Albay Rep. Joey Salceda, who chairs the House committee on ways and means

The remaining four packages of the tax reform program, which are currently being deliberated in the Congress, are Package 2 or the Corporate Income Tax and Incentives Rationalization Act (CITIRA), Package 2+ or the “sin” tax reform further increasing excise taxes on alcohol and e-cigarettes, Package 3 or the Real Property Valuation Reform, and Package 4 or the Passive Income and Financial Intermediary Taxation Act (PIFITA).

In the joint statement, they stressed that these tax reforms, as well as the proposed amendments to the Public Service Act (PSA), the Foreign Investments Act (FIA), and the Retail Trade Act (RTA), will help the Duterte administration achieve its twin goals of attaining an “A-minus” sovereign credit rating in the next few years and reducing poverty incidence from 21 percent in 2015 to 14 percent by 2022.

The signatories also lauded in their manifesto the economic feats that the government achieved in the first half of the Duterte presidency despite global financial headwinds.

“We commend the implementation of the ‘Build, Build, Build’ program to support inclusive economic growth, the quick measures taken to address elevated inflation last year, and the close coordination with both houses of the Congress that led to the passage of landmark reforms, such as TRAIN (Tax Reform for Acceleration and Inclusion), the additional increase in excise taxes on tobacco, the Rice Tariffication Law (RTL), the National ID Law, and the Ease of Doing Business (EODB) Law, among others,” they said in their joint statement.

The statement was signed by the following: Former Prime Minister and ex-DOF Secretary Cesar Virata; former DOF Secretary and Senator Alberto Romulo, who also served as Executive Secretary, Foreign Affairs Secretary, and Budget Secretary; former DOF Secretary Margarito Teves; former DOF Secretary Roberto de Ocampo, who is also Chairman and CEO of the Philippine Veterans Bank (PVB); former DOF Secretary Jose Camacho, who was also a former secretary of Energy and is currently Managing Director in the Asia Pacific Division of Credit Suisse; former DOF Undersecretary Romeo Bernardo, who is also vice chair of the Foundation for Economic Freedom (FEF);

Cielito Habito, professor at the Department of Economics in Ateneo, who had served concurrently as the Director-General of the National Economic and Development Authority (NEDA) and Socio-Economic Planning Secretary; Arsenio Balisacan, chairperson of the Philippine Competition Commission and former NEDA Director-General and Socio-Economic Planning Secretary; Fermin Adriano, former vice-chancellor of the University of the Philippines-Los Baños (UPLB) and board member of the Asian Development Bank Institute; and Filomeno Sta. Ana, coordinator of the Action for Economic Reforms (AER).

Package 2 of the CTRP aims to improve and modernize the country’s long-neglected corporate tax system, by gradually reducing the corporate income tax (CIT) rate from 30 percent to 20 percent as a measure to increase the Philippines’ competitiveness. This tax reform package was approved on third and final reading by the House of Representatives last Friday, Sept. 13.

The country currently imposes the highest CIT rate in the Association of Southeast Asian Nations (ASEAN).

The country’s top economists and former DOF secretaries are in favor of the rationalization and improvement of the fiscal incentive system. “A modern fiscal incentive system that is performance-based, targeted, time-bound and transparent will ensure that each peso granted as an incentive is not wasted, and is instead given to companies that provide a net positive benefit to the country,” they said.

Package 2+ seeks to increase the excise taxes on alcohol products and further increase the excise tax on heated tobacco and vapor products. The group endorsed the reform by saying that, “It is, at heart, a measure to promote public health, especially of the Filipino youth.”

Increasing the price of “sin” products through taxation will help discourage consumption and lead to better health and social outcomes. Moreover, this measure will also help ensure the financial sustainability of the Universal Health Care (UHC) program.

Package 3 seeks to promote the use of uniform real property valuation standards. This will help resolve right-of-way (ROW) acquisition issues that have stalled infrastructure projects for up to 10 years or more given valuation disputes.

“We support Package 4 of the CTRP as it makes the taxation of passive income and financial services and transactions simpler and more efficient by reducing the number of combinations of tax bases and rates from 80 to 40,” they added.

The group believes that “all these reforms are necessary if the Philippines is to move forward to a future with no extreme poverty by 2040.”

Their statement of support for the CTRP was in response to the call of Dominguez last week for these prominent public figures to rally behind proposals to improve the country’s tax system and make it simpler, fairer and more efficient.

In his speech during a lunch meeting with these experts, Dominguez said the Duterte administration is maintaining its “fighting target” for economic growth of 6 percent or above this year to keep on track President Duterte’s ultimate goals of lowering poverty incidence to 14 percent by 2022 and creating more opportunities for law-abiding Filipinos.

Dominguez said the swift congressional approval of the remaining packages of the CTRP and other economic reform bills meant to further open up the domestic economy to investments are crucial for the Duterte administration to achieve its goals of achieving high—and inclusive—growth and transforming the country into an upper middle-income economy ahead of schedule.

The other economic reform bills are the amendments to the PSA, RTA, and the FIA.

On keeping the full-year economic expansion target of 6 percent or higher, Dominguez said a catch-up spending plan crafted for this year and the timely passage of the 2020 national budget will help the government achieve this growth target, as he expressed optimism that there wouldn’t be a repeat of the delay in the approval of the 2019 General Appropriations Act (GAA), in light of the much better working relations this time between the executive and legislative departments.


Date Posted September 19, 2019

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