DOF: FOR PH TO GROW INTO HIGH-INCOME ECONOMY

‘Boost investment by extra P1T a year’

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The government must raise an ad-ditional P1 trillion a year to fund public investment that will upgrade the Philippines to a status of high-income economy by 2040, the Department of Finance (DOF) said Tuesday.

The Philippines is presently a lower-middle income economy with a gross national income (GNI) per capita of $4,125, using the World Bank Atlas method.

Within the Association of Southeast Asian Nations (Asean), the Philippine shares such status with Myanmar, Indonesia, Laos and Vietnam.

The high-income economies with a GNI per capita of $12,736 or more are Brunei and Singapore.

“Our estimate is: to achieve our targets of high-income status and to eradicate poverty, we need to raise investments by P1 trillion every year on top of the P1 trillion that we . . . [are already investing],” Finance Undersecretary Karl Kendrick Chua told the House Ways and Means Committee during a hearing on Tuesday.

Chua noted the Duterte administration must focus on improving tax and customs administration in the next three years to reach the goal.

Of the P1-trillion fund requirement, he said P600 billion can be raised from improved tax and customs administration, as well as savings from spending.

P400 billion will come from tax policy equivalent to some 2 percent of the country’s gross domestic product (GDP).

“This is to bring us to the level where our neighbors have experienced when they were growing to become upper middle income country and to eradicate poverty,” Chua added.

These can be realized if the current administration’s comprehensive tax reform package will be implemented.

“Currently, the way we look at the tax system, even if BIR [Bureau of Internal Revenue] and BOC [Bureau of Customs] were to be 100 percent efficient, we don’t think that they can achieve the targets that the budget has set. Why? Because the current tax system has built-in inefficiencies,” the DOF official noted.

For instance, the current tax system of the Philippines had not been adjusted to inflation, he said, noting that the collections from the excise tax on oil back—at 2 percent of the GDP in 1997—has now deteriorated to only 0.2 percent.

“The second is: we have built in a lot of exemptions and incentives, and many large corporations are beneficiaries of income tax holidays—and that creates loss of around 1.5 percent of GDP from estimates that we have gathered from the World Bank and other experts,” he said.

“Finally, we have the bank secrecy which prevents BIR from doing a proper audit. Because of these reasons, we believe that a reform of the policy is also needed,” he added.

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1 Comment

  1. Mariano Patalinjug on

    Yonkers, New York
    21 September 2016

    These Department of Finance officials seem wed to the THEORY that simply by boosting investments–by P1 trillion a year as suggested–will eliminate the very high incidence of POVERTY which now afflicts some 30 million Filipinos [out of a population of around 107 million] who are stuck in the quagmire of widespread and chronic poverty, living lives of extreme degradation and dehumanization.

    The REALITY as distinguished from THEORY is that such a policy does not and cannot make a real and significant dent on Poverty on the scale that it is in the Philippines because as experience shows a good portion of the resultant increase in GDP goes only to the top 1% of the country’s population, leaving just the “crumbs” to those who are categorized as “poor”–around 28 percent of the population.[There are now 21 US dollar billionaires in the Philippines in the Forbes magazine’s annual list of the world”s Billionaires, where there were only 11 in the previous year’s List.]

    Two national structural programs could do the job of wiping out systemic poverty from the land:

    1] An industrialization program encompassing heavy, medium and light industries; and

    2] A population control program designed to cut down the country’s explosive rate of population growth which now doubles the population every 35 years or so, to Replacement Rate within the next 15-20 years and from there to below that rate. [The RHLaw, sad to say, has been getting only “token” or lackadaisical implementation so far because of the Machiavellian machinations of the Catholic Bishops Conference of the Philippines.]

    MARIANO PATALINJUG
    patalinjugmar@gmail.com

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