Dominguez: Passage of tax bills needed to secure ‘A’ credit rating

The passage of pending economic bills in Congress, including further opening up the economy to foreign capital and taxation reforms, would augur well for the Philippines’ goal to achieve “A” credit ratings by 2022, the head of the Duterte administration’s economic team said.

In a statement, Finance Secretary Carlos Dominguez III said the prompt approval of tax reform packages “plus other pending economic reforms” will help secure an “A” credit rating for the Philippines in two years.

Dominguez said that in the case of debt watcher S&P Global Ratings, it indicated last year that the Philippines’ upgraded ‘BBB+’ credit rating may further be raised “if the government makes significant further achievements in its fiscal reform program.”

“Another factor is a determination of a marked improvement in the Philippines’ institutional settings,” Dominguez added, quoting S&P.

The economic team was embarking on a roadmap to “A” credit ratings in order to slash borrowing costs given that the Philippines would move up to upper middle-income status this year.

Once the Philippines becomes an upper middle-income country—defined by the World Bank as having per capita income above $3,956—in 2020, it will lose by 2022 the access to preferential interest rates that it was currently enjoying whenever it borrows from its bilateral partners and multilateral institutions.

Dominguez earlier said that the DOF will make a big push for the passage of the remaining packages of the Duterte administration’s comprehensive tax reform program in 2020.

The DOF had already succeeded in passing the Tax Reform for Acceleration and Inclusion Act as well as the ongoing amnesty programs on tax delinquency and estate.

The DOF is awaiting Preident Rodrigo Duterte’s signatures on several more tax reform packages that included higher excise on alcohol and tobacco.

Only three more packages remain pending in the legislature—Corporate Income Tax and Incentives Reform Act (Citira), the Passive Income and Financial Intermediary Taxation Act (Pifita), and land valuation reform.

Also part of the comprehensive tax reform program, although not of high priority for the DOF, were the planned general tax amnesty, which must include lifting of bank secrecy for tax purposes and automatic exchange of information as well as higher mining taxes and motor vehicle users’ tax.

Edited by TSB