President Rodrigo Duterte on Monday certified as an urgent measure the proposed Tax Reform for Acceleration and Inclusion Act or Train bill, following a request from the Finance Department.
The Finance Department said the measure was considered crucial to the financial sustainability of the government’s ambitious agenda to sustain the growth momentum and accelerate poverty reduction via a massive spending on infrastructure, human capital and social protection for the poor and vulnerable sectors.
“We are transmitting this letter of President Rodrigo Roa Duterte certifying to the necessity of the immediate enactment of House Bill No 5636 [the proposed Tax Reform for Acceleration and Inclusion Act],” Executive Secretary Salvador Medialdea said in a letter to House Speaker Pantaleon Alvarez dated May 29.
“The benefits to be derived from this tax reform measure will sustainably finance the government’s envisioned massive investments in infrastructure thereby encouraging economic activity and job creation, as well as fund the desired increase in the public budget for health, education and social programs to alleviate poverty,” President Duterte said in a separate letter to Senate President Aquilino Pimentel III.
Presidential Legislative Liaison Office head Adelino Sitoy was also furnished copies of the letter.
Finance Secretary Carlos Dominguez III made the appeal in a memorandum to President Duterte, in the hope that the House of Representatives, from where all tax and budget laws originate, could pass the Train program”•the first package of the Comprehensive Tax Reform Program, before Congress could adjourn on June 2.
Both the House and the Senate will reopen for the Second Regular Session of the 17th Congress on July 24, when President Duterte is to deliver his second State of the Nation Address.
“We believe that the president’s certification of the tax reform bill as an urgent legislative measure can help ensure timely and full passage of the tax reform package before the close of the session on June 2, 2017, so that the benefits of the reform can be felt sooner,” said Dominguez.
Trains program aims to make the country’s antiquated tax system simpler, fairer and more efficient, especially for the poor and low-income families, by making sizable cuts in personal income tax rates”•and to make up for the projected revenue loss, and at the same time raise funds for the Duterte administration’s massive expenditure program, by expanding the value added tax base and adjusting excise taxes on oil, automobiles and other products.
Dominguez warned of “dire consequences” in case of Congress’ failure to pass soon enough the proposed bill, given its design to help guarantee a steady revenue flow for the Duterte administration’s unmatched public investments over the next half-decade to support its envisioned “golden age of infrastructure,” attract investments and create jobs, cut the poverty rate from 21.6 percent to 14 percent, and transform the Philippines into an upper middle-income economy by the time the President leaves office by 2022.
Dominguez said without the Train bill, the government’s strategy to embark on an aggressive expenditure program by raising deficit spending to 3 percent of the gross domestic product would lead to an “unsustainable fiscal position,” which, in turn, could trigger a credit rating downgrade possibly costing the government an extra P30 billion in annual debt servicing and P100 billion more in higher borrowing costs for the public.