The Duterte administration’s head economic manager said the government remained confident of achieving an extensive tax reform program amid noise from politicians seeking reelection.
“There is now more political resistance to succeeding tax reform packages. Part of the reason for this resistance is the proximity of elections. Tax policy, as we know, is never the best way to be reelected,” Finance Secretary Carlos G. Dominguez III said in a speech during the Bureau of Internal Revenues’ 114th anniversary celebrations late on Wednesday.
Some legislators admitted hesitance to supporting the proposed second tax package after the first one, or the Tax Reform for Acceleration and Inclusion (TRAIN) Act, proved unpopular and was largely blamed for elevated consumer prices of late. The law imposed new excise taxes on cigarettes, oil products and sugary products, among others, to compensate for the restructured personal income tax regime.
“We are thankful to President Duterte for strongly endorsing the tax reform program during his Sona. This is the only way forward for our economy. If we fail in this, the impressive growth rates we achieved will not be fully sustainable,” Dominguez said.
The administration’s allies, led by newly installed House Speaker Gloria Macapagal Arroyo—former Philippine president and an economist—and Senate President Vicente Sotto III expressed support to the second tax reform package aimed at bringing down the corporate income tax rate of 30 percent—the highest in Asean, while rationalizing the fiscal incentives enjoyed by investors.
Dominguez said they were “committed to seeing the entire comprehensive tax reform program enacted this year.”
Five more tax packages are pending in Congress, covering another round of “sin” taxes, mining taxes, etc.
Dominguez also noted concerns on high inflation “has been politicized.”
“Tax reform was blamed for causing inflation. What should otherwise be understood as an economic phenomenon normally accompanying high growth has been skewed to pin blame on our reformist policies,” he said.
He noted the products that have contributed to higher inflation included cigarettes and sugary drinks. He said the taxes were meant to dissuade people from buying these unhealthy products.
Dominguez cited other factors contributing to the “slightly elevated” inflation environment including the spike in oil prices and the dollar rebound. —BEN O. DE VERA