SOCIAL protection programs, one of the priorities under the 10-point socioeconomic agenda of the government, are positive for Philippine economic growth, the Department of Finance (DOF) said.
A World Bank report noted the government has made significant progress in developing its social protection sector over the last 10 years, which has been one of its main strategies to address poverty and vulnerability, according to the DOF.
In a statement on Wednesday, Finance Undersecretary Karl Kendrick Chua said studies showed that the income multiplier of social protection programs is “overly” positive for the economy.
For every $1 of cash transfer, the return to the economy could go as high as $2.52, he said.
This is why a substantial portion of the P174.2 billion of expected net gain from the proposed Tax Reform and Inclusion Act would be spent on targeted transfer programs that will benefit the country’s most vulnerable sectors, he added.
The DOF had said the first of a series of tax reforms submitted by the DOF to the Congress in September would result in revenue losses of P127.4 billion in 2018, the first year of its proposed implementation.
However, gains totaling P301.6 billion from additional revenue from the proposed broadening of the value-added tax (VAT) and adjusting the excise tax on fuel and automobiles would offset the forgone revenue for a net gain of P174.2 billion, according to the DOF.
“We recognize that the tax reform will affect a number of vulnerable people. We are very much committed to protecting the poor, vulnerable, and low income sectors. The poorer the household is, the more social protection subsidies it will get especially during the first year of the Tax Reform Package One implementation,” Chua said.
The targeted transfers, Chua said, include time-bound unconditional cash transfers; public transportation programs for the benefit also of commuter; rice subsidies for indigent senior citizens; and higher Philippine health insurance (PhilHealth) coverage.
As a result “we will see higher incomes for 99 percent of the Filipino people even with the increase in excise taxes,” Chua said.
“Only those in the top 1 percent will see incomes reduce, as the rich tend to spend more, and so will have to pay their fair share by way of higher total excise payments,” the DOF official noted.
World Bank findings
In a recently released report, Washington-based World Bank said the most notable developments in the Philippine social protection sector were the national household targeting system or Listahanan—a conditional cash transfer (CCT) program—and the universal health care (UHC) program that reaches out to the bottom 40 percent of the poorest Filipino families on the Listahanan.
The flagship social protection Pantawid Pamilyang Pilipino Program (4Ps), a CCT program, was introduced to support poor families’ investment in health and education of children zero to 14 years old and to alleviate poverty. It has rapidly grown from 360,000 beneficiary households when it was launched in 2008 to 3.8 million poor households in 2013.
“By then, the Pantawid has become the world’s third largest CCT program—covering nearly 20 million people or 75 percent of the poor population and with a budget that reached 0.4 percent of GDP [gross domestic product],” it said.
The multilateral lender said free health insurance and access to primary health care have been extended to all the 4Ps beneficiaries, as well as other families in the bottom 40 percent of the population.
Both the 4Ps and UHC programs benefited from the Listahanan that was established in 2009, it said.
“The Listahanan contains information of 11 million households nationwide (about 60 percent of the population), of which 5.2 million households were classified as ‘poor’ and prioritized for various government assistance programs,” it said.