The Department of Finance-proposed comprehensive tax reform package (CTRP) is seen making the Philippines immune from the adverse impact of slower global growth.
This was the response of government economic managers when asked during a hearing on Monday by the House Committee on Ways and Means on tax reform how the CTRP would help the Philippines cope with the impact of the economic slowdown in China.
Agence France-Presse reported that China has warned that its economy faces severe challenges, signaling a further deceleration as it trimmed the 2017 GDP growth target to “around 6.5 percent.”
The economy is already growing at its slowest rate in more than a quarter of a century and the latest target is lower than the 6.5 percent to 7 percent set last year. Full-year growth in 2016 came in at 6.7 percent, the weakest since 1990, it added.
Finance Secretary Carlos Dominguez 3rd said the Philippines is not as reliance to exports compared with Indonesia, Vietnam and China, that is why the government will use the CTRP to stimulate the local economy so that the Philippines will be “immune” from developments in the global economic arena.
“Tax reform package is our immunization against the slowdown in the world economy. We use the funds to accelerate our infrastructure, which will create jobs and will make our economy more competitive,” he said.
Socioeconomic Planning Secretary Ernesto Pernia said the Philippine economy is not export-driven but domestic-demand driven.
“With this, spending by government or by households will strengthen domestic demand and that would shield us against the unfavorable winds in the global economy,” he said.
Budget and Management Secretary Benjamin Diokno said tax reform is one of the things that the Philippines should undertake in order to make the economy competitive and make the country an attractive place to invest in.
“Tax reform is long overdue,” he said.
The proposed CTRP will allow the government to build or improve 44,000 kilometers of national and local roads, construct more local hospitals and improve existing ones, attain 100 percent PhilHealth coverage, and achieve the ideal teacher-to-student and student-to-classroom ratios for the benefit of the country’s future workforce, Dominguez claimed.
Some P48 billion will be earmarked for targeted transfer programs for low-income groups and other vulnerable sectors to shield them from the initial impact of the CTRP, he said.
Package One of the CTRP is outlined in House Bill 4774. It seeks to lower personal income tax rates for 99 percent of the country’s taxpayers while expanding the value-added tax (VAT) base and adjusting the rates for consumption taxes such as the excise tax on petroleum products and automobiles, among other revenue-enhancing measures. VAT exemptions for seniors and persons with disabilities will be retained under the bill.
“This is the tax package that will enable us to reshape our economic growth to make it more inclusive. It is the tax reform package that will bring us to the irreversible path towards being a high-income economy in one generation and bring down our poverty rate to a mere 14 percent by 2022,” Dominguez added.
“This is our economy’s golden moment. If we fail to seize it, the conjuncture of opportunities will pass us and we will betray our people. We cannot afford to lose because of indecision or because we failed to act boldly,” he added.