THE four packages of the proposed Comprehensive Tax Reform Package (CTRP) may generate up to $4 billion of revenues by 2019 once passed into law, Finance Secretary Carlos Dominguez 3rd said in an investment forum in Hong Kong last week, as he tried to convince potential investors to place their bets on the Philippine economy.
During the 20th Credit Suisse Asian Investment Conference, Dominguez called on investors to help rewrite the Philippine growth story by taking part in the country’s nascent drive to finally close its infrastructure backlog that has for decades blunted its regional competitiveness as an investment hub.
Besides sustaining rapid growth, the Duterte administration aims to reshape the evolution of the Philippine economy into one that is investment-driven and more inclusive to open opportunities for all Filipinos.
Transforming the Philippine economy from consumption-led to one driven by investments requires upgrading the country’s infrastructure, realigning income tax rates to be competitive with the rest of the region and investing in training its youth to become a highly talented workforce, he said.
“Let me invite all of you to take a closer look at the rewriting of the Philippine growth story. It will be a heroic story of a people working their way out of poverty, of a government building a strong public order and a proud nation willing to be an engine of growth in a global economy that sometimes seems to be waning,” Dominguez said.
The Duterte administration is determined to implement a four-phased CTRP that will ensure the financial sustainability of an aggressive spending program designed to reduce the poverty level to 14 percent and transform the Philippines into a high middle-income economy by 2022, the Cabinet official noted.
The first package aims to lower the personal income tax rates along with the donor and estates taxes, while broadening the tax base by expanding the coverage of the value-added tax and adjusting the excise taxes on fuel and automobiles, he said.
The second package pairs the lowering of corporate income tax rates with the modernization of fiscal incentives, while the third package will tackle property taxes and the fourth will simplify and harmonize tax rates for all assets “to finally correct the bias of the current tax laws towards instruments that only the wealthy can access such as dollar-denominated accounts and time deposits,” he added.
The first package is projected to generate an additional $3 billion for the Philippine economy in 2018, while packages two to four may yield $1 billion more by 2019.
If these packages still fall short of the country’s revenue requirements, “we are prepared with a series of other tax measures” that “include taxes on sugary beverages and an increase in motor vehicle user charges,” Dominguez said.
The intention is to make the tax system fairer, simpler and broader based, he said. “The tax reforms by themselves should enhance a more inclusive economic growth by helping lift some six million Filipinos out of poverty. The more robust and reliable revenues generated by the reformed tax system should enable government to support economic investments over the long-term.”