AS the May 2022 elections draw near, many sectors are giving their laundry list for the next administration but businessmen preferred to ask what the next government should not do.
For Socioeconomic Planning Secretary Karl Kendrick T. Chua, his list includes keeping the current and past administration’s efforts to implement fiscal discipline and the liberalization of sectors of the economy.
In an economic forum hosted by the Management Association of the Philippines, Chua said the country has a good track record in terms of maintaining the country’s fiscal house as well as in opening up the economy to attract investments and create jobs.
“We have a very strong track record of managing the economy well over three administrations and that should continue, that should not be reversed. The prudence, the discipline, management of fiscal resources should continue,” Chua said.
“We also have a track record over six administrations to liberalize key industries whether in rice, in public utilities and telecoms, airlines, fertilizers, and so on. Even if they are slow to happen, they did happen over time. And that should not be reversed, otherwise you will have, I think, more challenging problems (to face),” he added.
Wealth tax
Chua also shared his thoughts on the possibility of imposing a wealth tax. Last year, the Makabayan bloc filed House Bill 10253 which aimed to impose a wealth tax of 1 to 3 percent on individuals with net value assets exceeding P1 billion.
A recent study by the Fight Inequality Alliance, Institute for Policy Studies, Oxfam, and Patriotic Millionaires stated that if the country legislated a progressive annual wealth tax, civil society groups estimate that the “super rich” would be able to increase the country’s revenues by $9.2 billion annually.
A less progressive wealth tax would still yield a significant amount of $6.3 billion annually. This is based on tax rates of 2 percent on wealth over $5 million; 3 percent on wealth over $50 million; and 5 percent over $1 billion.
However, Chua was quick to caution the next administration against this general route. He said imposing a tax on wealth that “can run away” would not benefit the country.
“If you tax money that can run away then they will move money to other countries with lower tax rate,” Chua told BusinessMirror on Thursday.
He thinks a wealth tax should only be imposed on assets that cannot be brought outside the Philippines such as real estate. Chua, the architect of the country’s tax reform program, said package 3 of the tax reform program aims to properly evaluate real properties.
Passive income
Chua also mentioned package 4 of the tax reform program, the Passive Income and Financial Intermediary Taxation Act (PIFITA), which will ensure that all taxpayers are treated fairly.
The PIFITA or Package 4 aims to simplify the taxation of passive income, financial services, and transactions. It will reduce the number of tax rates from 80 to 36.
It will also harmonize the tax rates on interest, dividends, and capital gains, and the business taxes imposed on financial intermediaries. Pifita will also remove the documentary stamp tax (DST) imposed on nonmonetary transactions.
“If the wealth is fixed then we should at least tax it equitably,” Chua said. “If the wealth can run away, then that’s (wealth tax) not how we should do it. That’s how I think we should look into this wealth tax.”
Priorities
Chua said part of Neda’s proposals to the next administration is to place climate change as the core of the government’s development planning.
This means, he said, whether policies and plans are in the agriculture, infrastructure, or energy sectors, these will be anchored on the need to mitigate or adapt to the impact of climate change.
Apart from this, Chua said efforts to innovate would also be crucial. Instead of simply copying the ideas or research and development of the country’s neighbors, efforts must be made to create new ideas, products, and ways of doing things in the country.
These need not be limited to high-technology products in basic sectors such as agriculture and in the provision of basic public services.
Efforts to create smart infrastructure in the country are also included in the priorities. This means creating infrastructure that improves the mobility of Filipinos, bearing in mind that roads are not always the best projects to do this since there are times this could just lead to more emissions.
These infrastructure projects should also be evenly distributed nationwide. While the government has implemented many projects, some regions and provinces have not benefited from them, he said.
He pitched more equity in the allocation of the infrastructure budget, based on an objective assessment that’s not only based on how well a region or a province, or politicians, fight or lobby for the projects.
“We are preparing the foundation for this and I hope the next administration will continue the work. And we are thinking about how we can improve productivity over the medium term and we think that we need to focus on a number of important thematics,” Chua said.
“These are some of the important priorities that we, in Neda think, should form the foundation of the next administration so that we can further accelerate and sustain growth after we address the Covid 19 pandemic threat,” he also said.