Former economic officials back passage of tax reform measures

MANILA, Philippines — Former officials of the Department of Finance (DOF) and the National Economic and Development Authority (NEDA), as well as economists, have called for the passage of the remaining tax reform bills in Congress to help the Philippines achieve an “A-” credit rating in the next two years, according to the Department of Finance.

According to the DOF, former finance chiefs, socioeconomic planning secretaries, and private economists have manifested their support for the remaining packages under the Comprehensive Tax Reform Program (CTRP) through a joint statement, which was signed following a lunch meeting with Finance Secretary Carlos Dominguez, Senate ways and means committee chairman Pia Cayetano, and House ways and means committee chairman Joey Salceda last week.

In their joint statement, the signatories said the passage of the tax reform bills, as well as the proposed amendments to the Public Service Act, Foreign Investments Act, and the Retail Trade Act, would help the administration meet its target of securing an A- sovereign credit rating in the next two years, and reducing poverty incidence from 21 percent in 2015 to 14 percent by 2022.

The group believes that “all these reforms are necessary if the Philippines is to move forward to a future with no extreme poverty by 2040.”

Currently, there are four remaining CTRP packages pending in Congress.

These include Package 2, or the Corporate Income Tax and Incentives Rationalization Act (CITIRA); Package 2 Plus, which seeks to further increase  excise taxes on alcohol and e-cigarettes; Package 3 or the Real Property Valuation Reform bill; and Package 4 or the Passive Income and Financial Intermediary Taxation Act (PIFITA).

According to the economists and former officials, they are in favor of Package 2, which aims to rationalize and improve the country’s fiscal incentives system.

“A modern fiscal incentive system that is performance-based, targeted, time-bound and transparent will ensure that each peso granted as an incentive is not wasted, and is instead given to companies that provide a net positive benefit to the country,” they said.

They also endorsed the passage of Package 2 Plus, noting that it is a measure to promote public health, especially of the Filipino youth.

They said increasing the price of “sin” products through taxation would help discourage consumption and lead to better health and social outcomes. Moreover, this measure would also help ensure the financial sustainability of the Universal Health Care (UHC) program.

Meanwhile, they said Package 3, which promotes the use of uniform real property valuation standards, would help solve right-of-way acquisition issues that hinder the implementation of infrastructure projects. 

“We support Package 4 of the CTRP as it makes the taxation of passive income and financial services and transactions simpler and more efficient by reducing the number of combinations of tax bases and rates from 80 to 40,” they said.

Among the ex-Finance secretaries who signed the joint manifesto are Cesar Virata, Alberto Romulo, Margarito Teves, Roberto de Ocampo, and Jose Camacho. Former finance undersecretary Romeo Bernardo, who is also vice chair of the Foundation for Economic Freedom (FEF), also signed the statement.

Former Socioeconomic Planning secretary Cielito Habito, who is now professor at the Department of Economics in Ateneo; Arsenio Balisacan, chairperson of the Philippine Competition Commission and former Socioeconomic Planning secretary; Fermin Adriano, former vice-chancellor of the University of the Philippines-Los Baños (UPLB) and board member of the Asian Development Bank Institute and Filomeno Sta. Ana, coordinator of the Action for Economic Reforms (AER), also supported the manifesto.