MANILA, -- Finance Secretary Carlos Dominguez III on Monday stressed the need to reform the Philippines' tax regime to ensure additional revenues to be used to build necessary infrastructure to sustain the economy's strong growth path.
In a statement, Dominguez said the domestic economy's growth trajectory is nearing its potential growth after posting above six percent growth in recent years.
In the last six years, average growth of the economy has risen at around 6.2 percent from about three percent in the past.
This enabled the country to achieve investment grade status in 2013 and further upgrades the following year.
Dominguez said the country's credit ratings face downgrade and investors' confidence on the economy may decline if economic achievements in recent years will not be sustained.
Thus, he stressed the need to ensure hikes in revenues through tax reform instead of borrowings in line with the bid to increase budget deficit to three percent of gross domestic product (GDP).
The Department of Finance (DOF) has submitted to Congress the first package of Comprehensive Tax Reform Program (CTRP) that involves the hike in excise tax on fuel and vehicles as well as the Value Added Tax (VAT).
The first package is seen to increase revenues by PHP163 on its first year of implementation.
Dominguez said their plan to increase budget deficit cap from 2016's 2.7 percent will exceed the three percent ceiling until 2022 if taxes will not be amended.
This, in turn, will make the government's fiscal position unstable and increase the possibility of ratings downgrade.
"The non-passage of the tax reform package now pending in the Congress will have dire consequences not only on our hard-earned gains in improving our macroeconomic fundamentals but also on the lives of our poor and vulnerable fellow Filipinos," he stressed.
Dominguez, on the other hand, assured that programs that will be put in place to counter the effects of any tax hikes on the poor.
He said that sans the tax reform the government faces additional debt payment of at least PHP30 billion.
He also cited that increasing infrastructure spending is a big factor in addressing huge backlog on infrastructure and would create additional jobs, thus, boosting domestic output.
"This means there will be no letup in the Duterte administration's commitment to spending big on urban and rural infrastructure as a growth driver, to guarantee sustained high, inclusive growth," he added. (PNA)
Source: Philippines News Agency