IMF suggests tax incentive cuts for businesses, more cash doles to poor
MANILA, Philippines—An official of the International Monetary Fund has urged the Philippines to consider reducing tax incentives to some businesses and channeling savings to conditional cash transfers to the poor as among the measures to correct income inequality.
Anoop Singh, IMF director for Asia and the Pacific, said in a press conference that addressing the challenge of reducing income inequality, particularly by providing jobs to the unemployed and individuals belonging to poor households, would require re-channeling of public resources to more vital areas.
For instance, Singh said, the government could reduce tax incentives granted to some business sectors and then use the savings to increase funds for conditional cash transfers for the poor.
Under the Conditional Cash Transfer (CCT) program of the government, the poorest households are given monthly food subsidies. Recipients are required to send children to public school and to have the mothers regularly visit public health centers.
Singh said additional public spending on social safety nets, such as public education, would help the country achieve the goal of poverty reduction. Educating the poor will give them better chances of getting employed and augmenting their incomes, according to Singh.
The IMF said addressing income inequality has become an important issue for the Philippines, saying the essence of boosting economic growth lay on the ability of the country to create more jobs and pull people out of poverty.
Visiting IMF officials to the Philippines said the challenge for the Philippines, which has been growing by a relatively decent pace of about 5 percent a year, has always been to make growth “inclusive” by making even the poor reap the benefits of an expanding economy.
Vivek Arora, IMF mission chief to the Philippines, said in a press conference that efforts of policymakers in the country should be geared toward both accelerating the growth of the economy and making the benefits of growth trickle down to the poor.
The suggestions came amid observations that while the domestic economy has been growing, the pace of growth has not been fast enough to reduce poverty and that the benefits of growth have not been experienced by the poor. This is evidenced by the fact that Filipinos living below the poverty line still account for more than a quarter of the population.
“The Philippines has to address the twin challenge of [accelerating] growth and making it more inclusive,” Arora said.
The IMF officials also said the government should intensify efforts at attracting more foreign direct investments, which they said would be necessary to generate more jobs and lift income levels.
They said attracting more foreign direct investments would also help protect the Philippines from the ill-effects of the weak global economy.
Anemic global demand has led to reduced incomes for the Philippine export sector, thus dragging its overall growth. The IMF said strengthening the domestic economy, such as through attracting more investments, would help the country better weather the impact of any global crisis.
