The curse of Sen. Ralph Recto has been lifted.
The head of the Duterte administration’s economic team on Monday expressed confidence the remaining packages of the comprehensive tax reform program would breeze through the upcoming 18th Congress per the results of the midterm elections.
“The message of the electorate is that the tax reform is fair, and if the money is not stolen and is used for their benefit—infrastructure and education—they (legislators) will win,” Finance Secretary Carlos G. Dominguez III said during the 2019 Pre-State of the Nation Address Economic and Infrastructure Forum.
He noted the backers of the administration’s banner economic program won, including Sen. Sonny Angara.
“Sen. [Sonny] Angara was the head of the ways and means committee and I know he was very concerned about that, yet he came out number six” in the senatorial race during the May 13 polls, Dominguez said.
The Finance chief also noted Albay Rep. Joey Salceda, who even gave the first tax reform package its eventual acronym “TRAIN” or Tax Reform for Acceleration and Inclusion Act, had been reelected.
Dominguez noted that in 2001 when then Sen. Ralph Recto led the increase in value-added tax (VAT) rate to 12 percent from 10 percent, “Recto lost [in] the next election.”
“The story here: if people see that the taxes, whatever tax increases, are being spent for their benefit, it is going to be a plus for the legislators who supported. I’m very confident that the lessons in this last election where no one who supported the tax reform lost will resonate in the minds of the legislators,” according to Dominguez.
He said he was optimistic the remaining seven packages of the tax program would be approved by next year.
The Finance chief said comprehensive tax reform, infrastructure development and more FDIs, among other additional reforms, would “help us ensure further GDP (gross domestic product) growth, lower poverty, and more opportunities.”
During its first three years in office, the Duterte administration managed to pass two packages—the TRAIN Law that took effect last year, and a part of package 1B through Republic Act No. 11213 or the Tax Amnesty Act of 2019, which paved the way for the ongoing estate tax and delinquencies amnesties.
The TRAIN Law slashed personal income tax rates but jacked up excise taxes on consumption of cigarettes, oil products, sugary drinks and vehicles, among other goods and services.
The pending tax reforms included the remainder of package 1B, which would increase the rates of the motor vehicle user’s charge and also implement a general amnesty law upon the lifting of bank secrecy in fraud cases and automatic exchange of information for tax purposes with the country’s treaty partners.
Package 2 or the Tax Reform for Attracting Better and Higher Quality Opportunities (Trabaho) bill, meanwhile, would not only reduce the corporate income tax rate—currently the highest in Asean—but also rationalize the tax and non-tax incentives being enjoyed by investors to reduce foregone revenues for the government.
Package 2 Plus covered higher excise on “sin” products such as tobacco and alcoholic drinks. The increase in rates for cigarette products was already approved by Congress.
Proposed tax reforms falling under packages 3 and 4 were aimed at making property valuation and taxation of capital income and financial services simpler, fairer and more efficient.