Dominguez lauds SSS, cites need to educate public to make pension fund sustainable for retirees

Dominguez lauds SSS, cites need to educate public to make pension fund sustainable for retirees

- in Economy
Finance news

Finance Secretary Carlos Dominguez III today commended the Social Security System (SSS) as an institution that provides “a reliable net of social protection” for retirees even as he underscored the need to educate the public about keeping this pension fund viable enough to provide continuous and sufficient benefits to its millions of members.

Speaking before SSS officials and employees on the occasion of the agency’s 59thanniversary, Dominguez said he understands the difficulty of convincing the public to support calls for higher contributions to ensure the financial sustainability of this fund for the benefit of the country’s private-sector retirees.

“Providing for institutions that look after social protection is a social good. However, the public is always inclined to want to pay less and derive more benefits,” Dominguez said.

Dominguez said he knows the challenge facing SSS executives in resorting to “public diplomacy” to convince member-retirees on the necessity for higher premiums, as he himself needs to embark on a similar diplomatic approach to win over taxpayers into supporting the Duterte administration’s comprehensive tax reform program, which is meant to generate enough funds for its 10-point socioeconomic agenda for inclusive growth.

In his speech, Dominguez commended SSS officials and employees for implementing measures that extended the actuarial life of the SSS and also congratulated this year’s recipients of the agency’s Kabalikat ng Bayan awards for helping the SSS become a stronger institution and expand its reach here and overseas.

“Let me congratulate as well the leadership and staff of the SSS for your tireless effort at providing the members a reliable net of social protection,” Dominguez said.

He said the viability of the social security fund had been threatened in the past because of public resistance to higher SSS premiums, which was necessary to extend the fund’s actuarial life.

“The SSS should constantly educate the public about the advantages of coverage, the wisdom of the institution’s investments and need to adjust contributions from time to time to take inflation into account,” Dominguez said.

“I understand the difficulty of conducting public diplomacy to encourage public support for higher contributions to ensure the fund’s sustainability,” the finance chief said. “I encounter the same need for public diplomacy today as the new administration embarks on a comprehensive effort at reforming our tax system.” Dominguez pointed out that the Duterte administration is committed to tax reforms not only to fulfill the President’s electoral mandate, but also because it needs to reconfigure the system in order to raise enough funds for its accelerated spending on infrastructure, human capital formation and social protection.

Higher spending on these priority programs will enable Filipinos to feel the benefits of the surging economy as President Duterte’s 10-point socioeconomic agenda for inclusive growth aims to reduce poverty by 1.5 percent yearly from the current 26 percent to only 17 percent by the end of his term in 2022.

The Duterte administration’s tax plan involves lowering personal and corporate income tax rates, while raising additional revenues through various tax policy and administration reform measures.

“A complete tax reform package is not merely a revenue issue. It will help government achieve its larger reform agenda that will break the pattern of jobless growth and bring us to the path of inclusive growth,” Dominguez said.

He said today’s personal income tax rates have become so “punitive” to the point that middle income wage workers continue to bear the burden of producing the revenues the country needs, which cuts deeply into their own incomes and has prevented “a real middle class from evolving.”

“We need to lower income tax rates because inflation has made these rates obsolete. The prevailing income tax rates are punitive. Our middle income wage earners, especially, continue to bear the burden of producing the much needed revenues which cuts deeply into their own income,” Dominguez said.

As for corporate income taxes, Dominguez pointed to the need to bring these down to rates that are at par with the rest of the countries in Southeast Asia, so our domestic economy could attract more private investments and create more and quality jobs.

“Because our tax regime is obsolete, it has become regressive. While we have the highest tax rates in the region, we suffer from the narrowest tax base. The complicated tax collection system allows millions — mainly the self-employed and professionals — to stay out of the tax net,” Dominguez said.

“The BIR Large Taxpayers Unit, on the other hand, caters to less than 3,000 companies. It is incomprehensible that an economy as vibrant as ours would have only a couple of thousand large taxpayers,” he said.

Besides cutting income tax rates and broadening the tax base, Dominguez said the new administration would also simplify the tax process and review tax incentives that have outlived their usefulness but still allowed many business to continue to operate tax-free.

“Over the years, our incentive system has become unwieldy, with more than 200 laws granting incentives to different sectors, activities and institutions,” Dominguez said.

He said the government is also studying proposals to lift some exemptions to the value added tax (VAT) to plug its leakages, raise fuel excise taxes and tax unhealthy food items.

“We need more roads, better port facilities, modern airports and a reliable power supply. We need revenues to continue supporting the conditional cash transfer program, train our people in new skills, improve education and public health care. All of these cost money even as they will benefit mainly the poor and the unemployed,” Dominguez said.

He said that while the government expects to lose revenues as a result of reduced income tax rates, the economic activity generated by the increase in domestic capital and the purchasing power of consumers will help offset the revenue erosion.

“We see the need for additional revenue measures to support the spending on infrastructure required to push our economy to the next higher growth plane,” Dominguez said.

He said now is the best time to break the oppressive pattern of poverty persisting among majority of Filipinos even while the economy is growing.

“We have the convergence of several positive factors: a dynamic growth rate, a low interest regime favorable to new investments, a demographic ‘sweet spot’ that brings many young people to the labor force, high business and consumer confidence, and, most important, a national leadership willing to deploy its immense political capital to achieve real change for our people,” Dominguez said.

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