Amid a controversial all-out war on drugs, the passage of a comprehensive tax reform package could help buoy the Duterte administration into sustaining the country’s robust growth while alleviating poverty, economists said.
“In our view, the Duterte administration’s first 100 days have set a clear policy direction for the ship of state. But the government will have to deliver soon on economic benefits for the poor with the passage of tax reforms, which would prove that its performance is not limited to just the war on crime. It would help sustain Duterte’s strong support,” Citibank Philippines economist Jun Trinidad said in a research note dated Oct. 9.
Trinidad, however, noted that a policy risk would be in the form of the populist P125 daily wage hike proposed by the left-leaning faction in Congress. He added, “Government’s strong antimining bias and preference to end labor contractualization do not seem to jive with its pro-investment campaign.”
Mr. Duterte’s tax reform package seeks to reduce the maximum personal income tax from 32 percent to 25 percent and the corporate income tax from 30 percent to 25 percent. It also seeks to expand the value-added tax (VAT) base by reducing the coverage of its exemptions. The program also bats for the adjustment of excise taxes imposed on petroleum products as well as the restructuring of the excise tax on automobiles except for buses, trucks, cargo vans, jeeps, jeepney substitutes and special purpose vehicles.
Thanks to a receptive Congress too, the President was able to clearly define the government’s policy direction, he added.
Trinidad said the government’s goal of sustaining talks on constitutional amendments side by side with the move toward federalization, the revival of public-private partnership (PPP) projects and the recalibration of Bureau of Internal Revenue (BIR) and Securities and Exchange Commission (SEC) rules that are more “business friendly” were helping sustain strong private investments.
Mr. Duterte continued to enjoy high approval ratings in his first 100 days in office, which most political observers link to strong support for his resolute war on drugs. “Though controversial, the antidrugs war has reduced crime, particularly in the depressed/low-income key cities in Metro Manila,” Trinidad noted.
In a separate statement, the Foundation for Economic Freedom (FEF) said the tax reform package proposed by the Duterte administration could help the country sustain an annual economic growth of at least 7 percent, sharply reduce poverty to 17 percent from the current 26 percent and create more jobs over the next six years.
FEF, an advocacy group for good economic governance and market-friendly reforms, strongly commended the Department of Finance for crafting what it deemed was a “forward-looking” fiscal program.
“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. We believe that this program will translate to a more comfortable life for all Filipinos along with safe, healthy, and peaceful communities all over the country,” the group said in a statement.