Finance Secretary Carlos Dominguez III said Thursday the Philippines is now “fiscally secure” and its government ready to fund its ambitious infrastructure program that will sustain the economy’s growth momentum and dramatically bring down poverty incidence to 14 percent by 2022.
From the time President took over in July 2016 to May 2017, revenue collections increased 7 percent higher than the same period in the previous year to P2.09 trillion, in part because of the administrative reforms put in place in the Bureaus of Internal Revenue (BIR) and of Customs (BOC), Dominguez said.
He said the approval by the Congress of the Duterte administration’s first tax reform package—the proposed Tax Reform for Acceleration and Inclusion Act (TRAIN)–will ensure a steady revenue flow for the government’s massive infrastructure buildup and guarantee a “breakout growth rate” of above 7 percent that will be sustained over the medium term.
This robust pace of growth will, in turn, enable the government to pull down the poverty rate from 21.6 percent today to a significantly lower 14 percent by the time President Duterte leaves office in 2022, making the benefits of growth inclusive for all Filipinos, Dominguez said.
“Even at this earlier stage in our reform effort, you can distinctly hear the tiger roar. We are on the path towards a modern, investment-led and trade-driven economy,” said Dominguez at a Malacanang press briefing where he highlighted the first-year accomplishments of the Duterte administration on the fiscal and economic fronts.
Dominguez thanked the House of Representatives for its overwhelming support for TRAIN, which was approved by the chamber with a 246-9 vote last May 31.
The bill’s approval by a vast majority of the House members “shows how seriously they consider the tax reform because it benefits the far majority of Filipinos, and everyone wants to see the economy grow and benefit them in the coming years,” Dominguez said.
“This is an important milestone signaling a strong possibility that this package may be enacted into law shortly after Congress resumes this July,” the finance chief said.
He said the administration and its partners in civil society and the private sector will work hard to ensure that the Senate passes a tax reform package consistent with the proposal endorsed by the Department of Finance (DOF) after the Legislature reopens its session on July 24, especially after the President certified the bill as an urgent and priority measure before the end of the first regular session of the 17th Congress.
“We take heart at the fact the passage of the tax reform measure was welcomed by nearly all stakeholders: businesses, international development partners, credit rating agencies and, most of all, wage earners,” Dominguez said.
He said “The package accomplishes the dual goals of increasing disposable income for our workers and increasing spending for the poor” and is “a win-win package for our people.”
Dominguez cited the GDP’s robust 6.68 percent growth rate for the first nine months of the Duterte administration, which is faster than the expansion rates in all other previous administrations; the growth in investments spurred by low and stable interest rates; the average inflation rate of 2.64 percent in the first 11 month of the Duterte presidency, and the decline in the debt-to-GDP ratio from 43 percent as of the end-June 2016 to 41.9 percent by the end-March 2017 as among the key factors showing that the government is on track to meet its economic targets.
As a comparison, GDP growth for the first nine months was 4.69 percent in the presidency of Corazon Aquino and 2.10 percent under President Ramos. For the same period, it was 0.17 percent under President Joseph Estrada; 3.0 percent, Gloria Macapagal Arroyo; and 5.98 percent, Benigno Aquino III.
“We are on our way towards achieving the growth breakout our strategy aspires for,” he said.
“The broader economic strategy is bearing fruit. GDP grew by 6.68 percent during the first 3 quarters, faster than all other administrations. We expect to grow close to the targeted 7 percent through the year,” Dominguez said.
In the first 9 months of the Duterte administration, T-Bill rates averaged 2 percent, the lowest of all previous administrations despite the start of rate normalization undertaken by the US Federal Reserve, while the average inflation rate for the first 11 months stood at 2.64 percent, also the lowest registered in all previous administrations, Dominguez said.
He said the reduced debt load will allow the government “enough flexibility to pump prime our economy” when complemented by a tax reform package that will provide funds for the Duterte administration’s planned unprecedented spending on infrastructure, education, health and social protection for the poorest of the poor.
The TRAIN bill approved by the House slashes personal income tax rates for 83 percent of Filipinos to enable them to increase their disposable income, which, in turn, will drive the growth of the domestic market.
TRAIN also provides for complementary measures expected to raise additional revenues for the government estimated at P133.8 billion in 2018.
At the same time, reforms in tax administration are now being implemented in the BIR and BOC, such as the expansion of the Large Taxpayers Service to closely monitor large businesses, and the strengthening of anti-smuggling capabilities, Dominguez said.
“We are bringing in all the powers of modern information technology to make electronic governance real and ensure a sustainable fiscal position. We are continuously fighting red tape and improving our economy’s competitiveness,” he added.