Gross domestic product should grow 9 percent to 10 percent annually for the Philippines to become an upper-middle income economy, which may be achieved if the proposed tax system reform is carried out, economist and lawmaker Joey Salceda said.
Describing the country’s current tax system as essentially “a subsidy to the rich,” the House Representative from Albay said implementation of the proposed Comprehensive Tax Reform Program (CTRP) is the only way to make the system more equitable, given that the Philippines is not a socialist state but a democratic country.
Salceda pointed out that the first package of the Department of Finance’s (DoF) tax reform plan, which aims to lower the personal income tax (PIT) while adjusting rates of consumption taxes to current inflation, is the “only systematic way to address this inequality” in the tax system under a democracy like the Philippines.
He said that such an ambitious tax reform plan is necessary to realize the current administration’s goal of transforming the country into an upper-middle income economy by 2022.
“I think it is valid and legitimate that we should be part of the upper-middle income countries. So to do that, you need to grow the economy by 9 to 10 percent,” Salceda said.
The CTRP, which he said would ensure the financial sustainability of the government’s massive infrastructure program, is the way to attain these high growth targets.
He said the government cannot tax the rich exclusively to protect the poor from any of the CTRP’s effects because such a measure would be immediately struck down as class legislation, which is prohibited under the Constitution.
“The entire Philippines is now under a process where, because of globalization, capitalism, which we can’t withdraw from, there is a massive suctioning or concentration of wealth—all of it is going to the top,” Salceda said.
“So we need to deconcentrate the economy. The way to deconcentrate the economy is essentially to make the rich pay their correct taxes,” he added.
Package One is contained in House Bill (HB) 4774, the refined version of the DoF’s plan that was filed in the chamber by Rep. Dakila Carlo Cua of Quirino, who chairs the House Ways and Means Committee.
HB 4774 aims to lower personal income tax rates for 99 percent of the country’s taxpayers, while expanding the value-added tax (VAT) base and adjusting rates for consumption taxes such as the excise tax on petroleum products and automobiles.
VAT exemptions for seniors and persons with disabilities will be retained under the bill.