The country’s leading economists, former finance secretaries and heads of the National Economic and Development Authority (Neda), strongly support and are pushing for the approval of the Tax Reform for Acceleration and Inclusion (Train) bill, a legislation of fiscal reforms for the government’s vision of inclusive growth, now awaiting approval in Congress.
The newly crafted fiscal-reform package contained in House Bill 4688, authored by Albay Rep. Joey S. Salceda, primarily aims to “create a tax system that is simpler, fairer and more efficient, characterized by low rates and a broad base promoting investment, job creation and poverty reduction”.
Salceda filed the bill in September last year and is set as a “first priority” legislation by the Ways and Means Committee, when regular Congress session resumes. The country’s current tax rates are based on the 20-year-old National Internal Revenue Code, which has not been substantially modified since 1997.
Train, as presented by Salceda, aims to “ultimately reduce poverty to single digit, grow the economy by 9 percent and transform the Philippines into an Asian economic powerhouse by 2028, with a $1.2-trillion GDP. It will then qualify the country for membership in the Organization for Economic Cooperation and Development.” When enacted into law, Train will be implemented by the Department of Finance (DOF).
The Foundation for Economic Freedom (FEF), composed of ex-officials from the DOF and five former heads of the Neda, in a recently published statement, endorsed the reform proposals, which, they said, intend to “put more money in people’s pockets, encourage investment, ultimately leading to the eradication of extreme poverty.”
The FEF, an advocacy group for good economic governance and market-friendly reforms, also commended the DOF and the Duterte’s economic team for “crafting a forward-looking fiscal program for legislation.”
The FEF said the “proposed legislative program creates a solid foundation for the government’s vision of inclusive growth, improved public services and improved purchasing power among consumers.”
The statement was jointly signed by FEF advisers and members, including former Prime Minister and DOF secretaries Cesar E. A. Virata, Jose Isidro N. Camacho, Jesus P. Estanislao, Roberto F. de Ocampo, Jose T. Pardo, Cesar V. Purisima and Juanita D. Amatong; former Neda directors-general Arsenio M. Balisacan, Emmanuel F. Esguerra, Cielito F. Habito, Felipe M. Medalla and Romulo L. Neri; and ex-DOF undersecretaries Joel A. Bañares, Romeo L. Bernardo, Cornelio C. Gison, Lily K. Gruba, Milwida M. Guevara, Jose Emmanuel P. Reverente and G. Florencia Tarriela.
They said the “structural weaknesses of the outdated tax system make our economy less competitive relative to our neighbors and deprive our people of deeply needed investments to improve their lives.”
“We believe this program will translate to a more comfortable life for all Filipinos along with safe, healthy and peaceful communities all over the country. We have studied the proposed tax-policy reform program, which is the subject of public consultations, and found it to be integral to the attainment of said vision. It is also aligned with the 10-point socio-economic program adopted by the government,” they added.
The statement stressed “the proposed comprehensive tax reform is progressive, timely and well-crafted to achieve the vision of a prosperous Philippines free of poverty. For these reasons, we strongly support the reform and urge the public to do the same.”
In one of his newspaper columns in September last year, former Socio-economic Planning Secretary Gerardo Sicat said the tax-reform program is comprehensive and contains different cohesive parts that help to produce a larger revenue to finance government development programs while realigning also the tax burden across income classes in support of national development.
“The overall gains in tax efforts that such reforms hope are expected to bring in an additional 3 percent of GDP. In terms of actual revenues, by the year 2019, this will mean around P600 billion of new revenues. Two-thirds of these revenues [P400 billion] will come from the tax-reform program, while the rest [P200 billion] from the administrative reforms,” Sicat said.
“If this bold reform program gets approved, the goal of achieving sustained growth would be near in sight, provided he [Duterte] sticks to the goal of achieving the 10-point economic program—which, of course, represents another test of will. Any failure to pass the important components of this program or to scale it down in terms of revenue productiveness could cause either a reduction in goals or, if continued, could induce more inflationary pressures as more budgeted expenditure by the government is undertaken,” he added.
Salceda said Train runs parallel with President Duterte’s “Tunay na Pagbabago” or real positive change commitment to the Filipino people, that includes more inclusive growth and comfortable life for all, improved public services, more and better jobs and more money in the people’s pockets; and safe, healthy, and peaceful communities.
Train is set to lower personal income tax rates from the current top rate of 32 percent, to only 25 percent. It also adjusts tax brackets that have remained unchanged for decades, while offsetting a possible drop in collections by expanding the value-added tax base, among others, Salceda, also House appropriation committee senior vice chairman and vice chairman of the House committees on Ways and Means, and Economic Affairs, said.