Economists appeal against dilution of PH tax reform package

Foundation for Economic Freedom

The Foundation for Economic Freedom (FEF), an advocacy group for good economic governance and market-friendly reforms, has appealed to the Senate to adopt the Duterte administration’s tax reform framework, noting this package would help the country sustain an annual economic growth of at least 7 percent in the coming years.

“We fully support the tax reform originally proposed by Department of Finance (DOF), and appeal to Senators not to unduly dilute its provisions as this would impair the country’s infrastructure spending and fiscal sustainability,” FEF said in a press statement on Friday.

“Tax reform is particularly important in the face of new spending mandated by the Congress – free irrigation, free tuition in SUCs (state universities and colleges), escalating pension benefits for uniformed personnel, and increases in SSS (Social Security System) pensions unmatched by increases in contribution. Moreover, this targeted revenue hike will temper the impact of anticipated higher interest rates due to global market developments,” the group said.

The first phase of tax reform package certified by Pres. Rodrigo Duterte as an urgent piece of legislation simplifies and lowers personal income tax rates while broadening value added tax coverage, rationalizing estate and donor’s tax and adjusting oil and automobile excise taxes. The bill is now undergoing Senate deliberations.

FEF believes that the comprehensive tax reform program will allow every Filipino an equitable opportunity to contribute to a “sustained and truly inclusive” economic growth.

The group strongly commended the DOF led by Secretary Carlos Dominquez for crafting a forward-looking fiscal program for legislation in turn seen to lay 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 across the country,” the FEF said.

With the right set of policies and programs that create an enabling environment for private sector investments, FEF said the Duterte administration could also achieve its goal to reduce poverty from 21.6 percent to around 13-15 percent, and significantly reduce unemployment rate over the next six years.

The advocacy group said fiscal stability, sustained funding for government programs, and investment-friendly tax policies could help the government attain these objectives.

FEF agreed that the entire package could help raise the additional P1 trillion needed annually to fund investments in infrastructure, education, health, social protection, training, and research and development.

Moreover, FEF said the design and various components would be able to address problems in the current tax system namely: a narrow tax base; complex collection policies with numerous leakages; cumbersome and costly exemptions with debatable benefits; inequitable taxation of salaried workers; uncompetitive rates vis-a-vis our country’s peers; and tax policies that are prone to gaming, evasion, and corruption.

“We particularly support the downward adjustments in the personal income tax on the grounds of fairness,” FEF said.

“We also strongly back the reduction in the corporate income taxes, which will promote and attract more investments and facilitate job creation.”

FEF also expressed support to the key revenue-enhancing measures meant to raise revenues for public investments, notably: the increase in fuel taxes; the rationalization and reduction in fiscal incentives; the selective lifting of bank secrecy laws with respect to fraud; and the expansion in the value added tax (VAT) base, including lifting of exemptions on cooperatives, low-cost housing, renewable energy, and for senior citizens except medicine.