MANILA-- The country's leading economists, former finance secretaries and heads of the National Economic Development Authority (NEDA) strongly support and push for the approval of the Tax Reform for Acceleration and Inclusion or 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 SarteSalceda, 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 USD1.2 trillion Gross Domestic Product (GDP). It will then qualify the country for membership in the Organization for Economic Cooperation and Development (OECD)." 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 Department of Finance (DoF) and five former heads of 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 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. BaAares, Romeo L. Bernardo, Cornelio C. Gison, Lily K. Gruba, Milwida M. Guevara, Jose Emmanuel P. Reverente, and G. FlorenciaTarriela.
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 ten-point socio-economic program adopted by the government," they added.
The statement stressed that "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 three 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 "TunaynaPagbabago" 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 (VAT) base, among others, said Salceda, House Appropriation Committee senior vice chair and vice chair of the House committees on Ways and Means, and Economic Affairs.
Proceeds from tax reforms can help finance major development projects which are integral parts of the Duterte 10-point economic agenda, among them infrastructures, social reforms and programs, educational investments and anti-poverty programs - the direct income transfers or unconditional cash transfers, benefiting some six million families in the country.
The measure is a concrete step in making tax rates on income in the Philippines competitive in the region and fit the structural objective of the Asean Economic Community (AEC). It seeks the "full and immediate adjustment of Personal Income Tax (PIT) on the first year," since according to Salceda, "the PIT income bracket is one of the most horrific and protracted social injustices" confronting Filipinos.
Salceda said HB 4688 also provides that 25 percent of the P165 billion compensating revenues from excise tax on petroleum products will be earmarked for subsidies to the lowest 50 percent of the population by way of fare vouchers and direct income transfers to be administered by the Department of Social Welfare and Development (DSWD), and to be designed by an inter-agency committee composed of DSWD and the Departments of Finance (DoF) and Budget and Management (DBM).
The direct income transfers, he said, will make the entire tax package more progressive with the lowest 10 percent of the population seeing incomes rise by 12 percent, and it will be effective for three years. The annual inflation adjustments on excise tax on petroleum will not be implemented if the Dubai crude exceeds USD85 per barrel in the previous year. (PNA)
Source: Philippines News Agency