The government is expected to yield some P206.8 billion by the end of 2018 if the Duterte administration’s proposed tax reform policy will be approved before June this year, according to the Department of Finance (DOF).
In a briefing of DOF officials before the House of Representatives ways and means committee, Finance Undersecretary Karl Kendrick Chua on Wednesday said the tax reform plan would generate P41.5 billion in the second half of 2017, and legislated tax administration reforms would raise another P48.1 billion if enacted on time.
DOF said the tax reform plan, as proposed in House Bill No. 4774, will net a total of P162.5 billion within the start of its full implementation in 2018. The revised package seeks to lower personal income taxes, broaden the value-added tax base, adjust excise tax on petroleum and automobile, and reduce excise and donor’s tax.
Lowering of personal income tax rate and estate and donor’s tax will result in a loss of P139.6 billion in revenue, but the government will gain P302.1 billion from VAT base expansion, automobile and petroleum excise, and other complementary revenues, the DOF said.
Chua said the DOF is proposing to raise some P366 billion a year from 2016 to 2022 or a total of P2.2 trillion pesos over the medium term to fund investments in infrastructure, education and training, health, social protection, welfare and employment, and to achieve the long-term goal of poverty eradication and inclusive economic growth.
Chua, a former World Bank economist for the Philippines, said the tax reform package is an “antipoverty and anti-inequality” that aims to reduce the poverty rate to 14 percent six years from now and help the Philippines achieve a high-middle income status like Thailand and China by arriving at a “simpler, fairer, and more efficient” tax system.
“However, without this planned investment buildup via tax reform, the government will merely “muddle through” and cannot meet the prerequisites to high and inclusive growth, which are a growth rate of at least 7 percent per year, and driven by investments rather than by consumption,” he added.
For infrastructure, Chua said the tax reform program can fund and concretize 3,714 kilometers of national gravel roads, 10,473 kilometers of national asphalt roads, 30,209 kilometers of local gravel roads, irrigate 1.3 million hectares of land, and provide 7,834 isolated barangays and 23,293 isolated sitios with road access. Additional revenue will also be used to fund infrastructure projects of the Department of Public Works and Highways, including the construction of major highways, expressways, and flood control projects, he added.
In the education and health sectors, Chua said the tax reform plan will be able to help in achieving 100 percent enrollment and completion rates, build 113,553 more classrooms, hire 181,980 teachers between 2017 and 2020, upgrade 703 local hospitals and establish 25 local hospitals, upgrade 263 and build 18,412 new barangay and rural health centers, achieve 100 percent PhilHealth coverage, and hire additional doctors and medical personnel.
“In summary, tax reform is needed to fund the ten-point socioeconomic agenda… We are redesigning our tax system to be simpler, fairer, and more efficient for all while also raising the resources needed to invest in our infrastructure and our people. Our goal is to correct our tax system’s inequity,” Chua added.
Rep. Dakila Cua, author of the tax reform bill, said: “To realize these aspirations, the Duterte administration recognizes the need to sustain high growth of at least seven percent every year for one generation, shift the source of growth from consumption to investment, and heavily invest in our people through improved social services, such as public health and education systems, and in better infrastructure to improve connectivity and raise productivity.”
“These necessary investments require an additional one trillion pesos annually over the long-term, of which some 400 billion pesos (2% of the GDP) is targeted by 2019,” Cua added. JE