FINANCE Secretary Carlos Dominguez 3rd has vowed to work closely with the Bureau of Internal Revenue (BIR) to ensure the financial sustainability of the Duterte administration’s ambitious program to maintain economic growth and ease poverty by increasing investment in education and health care.
He said the BIR is working “under extraordinary circumstances” at “the frontline of the new government’s broad effort to reverse the pattern of slow and exclusive growth” and meet the challenge of freeing six million Filipinos from poverty on the Duterte watch.
Speaking at the Fourth Quarter Revenue Command Conference held recently at the BIR Head Office in Quezon City, Dominguez mentioned that gross domestic product (GDP) expanded by 7.1 percent in the last quarter—making the Philippines the fastest growing economy in Asia in that period—and for the government to sustain this momentum in the medium term, the BIR must help raise enough revenues for investments to transform the economy from a consumption-led into an investment-driven one.
This will entail massive public investments in infrastructure to pull down production costs to match those of the Philippines’ more competitive Asian neighbors, he said.
“The new administration has committed to deliver truly inclusive growth for our people. That means we have to ensure the sustainability of our growth momentum while at the same time ensuring that all our people are brought to the economic mainstream through investments in our human capital, particularly education and health care,” he added.
The Department of Finance (DOF) submitted to Congress in September its proposed Tax Reform for Acceleration and Inclusion Act, which details the first tax plan on lowering personal income tax rates.
This first package also includes compensatory measures that aim to expand the base for the value-added tax (VAT) to plug massive leakages, adjust the excise tax on petroleum products and index these to inflation, and restructure the excise tax on automobiles via a progressive ad valorem system.
“It might seem unwise to bring down income tax rate at precisely the moment we need more revenues to fuel our economic growth. But that is precisely the challenge. We have to renovate our tax system to become simpler, fairer and more efficient. While reducing the tax rate, we need to improve our compliance and plan to broaden the tax base,” he said.
“With the plan to lower rates, the BIR should now prepare its own plans to broaden the base of our taxation. The goal is to make the lower rates revenue neutral through improved tax administration,” he said.
Dominguez said that in order to convince legislators and taxpayers to sign off on this tax plan, the BIR will have to demonstrate that it is capable of henceforth improving its administrative efficiency and plug the perennial leakages in its tax collection drive.
“One of my most difficult tasks right now is convincing the Congress to pass the [tax reform plan]. Their argument against me is you. You have not delivered enough. The Congress and I have no answer to that.
That’s why I came here today. I want to know from you what to answer the Congress. Why are you seen as being so inefficient and quite frankly, quite corrupt? This is my difficulty in helping the Filipino people come up with a very strong, new tax reform phase. So I hope to listen to you in a few minutes. Tell me how I can defend you in Congress by telling me how you are improving your tax administration,” Dominguez told BIR officials and employees during his visit.
He expressed confidence that the BIR family is talented and dedicated enough to deliver on this daunting task of “breaking new ground” and doing “new things for our people.”
“Public finance is the lynchpin of this ambitious economic program. Without the support of strong public revenues, the entire economic program will unravel. The reforms cannot be done. The growth cannot be sustained,” Dominguez said.