The infrastructure to be built and the jobs to be created as a result of the first tax reform package would also allow non-taxpayers to reap the benefits from what Finance Secretary Carlos G. Dominguez III described as “the first major legislative victory for the Duterte administration and the Filipino people in 2017.”
“Even those not paying taxes will benefit [from the Train] because of higher spending for education, healthcare and other forms of human capital development that would help set the foundation to lift themselves out of the poverty trap,” Dominguez said in a statement, referring to Republic Act (RA) No. 10963, or the Tax Reform for Acceleration and Inclusion (Train) Act.
Last week, President Rodrigo Duterte signed into law package 1A of the Train, which would slash and restructure personal income tax rates that stayed the same for two decades starting January 2018, while also jacking up or slapping new taxes on consumption of oil, cigarettes, sugary drinks, and vehicles.
“How can I benefit you if you’re not paying tax? I can benefit you by giving you a job, right? So how am I going to do that? Invest money and then create infrastructure,” Dominguez explained.
Part of the proceeds of the Train law would fund the ambitious “Build, Build, Build” infrastructure program.
With the five items vetoed by Duterte from RA 10963, Dominguez last week said that the net revenue gain from the measure will rise to P90 billion.
“The incremental revenues to be generated from the Train will help provide the initial capital for the government’s P8.4-trillion infrastructure modernization program, which will be the catalyst in sustaining the economy’s high growth trajectory and in transforming it to a high-middle income one by 2022 while lowering poverty incidence to 14 percent by that time,” Dominguez said.
“About 70 percent of the incremental revenues generated from the Train will help usher in the country’s ‘golden age of Infrastructure’ on the Duterte watch,” the Finance chief added.
According to Dominguez, “You cannot borrow it all. If you keep on borrowing, how do you know you’ll be able to repay it? It’s like any business. You start a business; you have your own capital. The incremental revenues from the Train are our capital. We figure we can fund about 25 percent of the program and borrow the rest.”
“One major benefit of the infrastructure buildup is the distribution of wealth to the countryside as farmers and other rural workers would be able to transport their goods at lower costs and widen their access to markets. People in urban centers, in turn, will get to enjoy lower prices of basic goods because of the reduced costs of transporting and distributing them,” Dominguez noted.
“Obviously, the reason we’re doing this is basically to reduce poverty. How do you reduce poverty in the Philippines? First of all, you create lot of access. Why are people poor? They are poor because they have no access to markets,” Dominguez added.
“In the end, the economic activity that the Train and the infrastructure buildup will generate will lower the costs for everybody and create more income in other places. So that’s why we need this tax reform law,” the Finance chief pointed out.
Citing estimates of the state planning agency National Economic and Development Authority, the Department of Finance had said that the comprehensive tax reform program, composed of a total of five packages, will generate about half a million additional jobs in the next six years, hence could lift up to 250,000 Filipinos out of poverty.
“Based on surveys done by the Philippine Statistics Authority, one full-time job is created for every P1 million spent on infrastructure, with a multiplier effect of another job generated as a result of the spillover effect to other related industries,” Finance Undersecretary Karl Kendrick T. Chua had said. /kga