Any tax bill proposed in Congress will always be met with opposition and distrust. To the layman, the bill—be it a reform package or a plain increase in taxes—will cause more hardship. Such bill is equated with higher prices and reduced spending power.
Finance Secretary Carlos Dominguez III this week tried his best to defend the Comprehensive Tax Reform Program before the House ways and means committee. House Bill No. 4774, which contains the initial package that aims to make the tax system more progressive, plans to lower the personal income tax rates to make them at par with those of other economies in Asia, expand the value added tax base and adjust the excise taxes on oil and automobiles.
Lowering the personal income tax is a no-brainer and will please all wage earners in the Philippines. Expanding the coverage of the value added tax and adjusting the excise taxes on oil and motor vehicles, however, impart an opposite message. The latter, in compensating for the revenue loss from a lower personal income tax, will certainly translate into higher prices of fuel and certain goods and services.
The tax bill will result in a net revenue take for the government, which Dominguez is rationalizing in the context of improving the lives of the Filipinos and boosting economic growth.
Increased taxes, per se, are not bad as long as their intended objectives are achieved. The finance chief sees the tax reform package, or plainly increased taxes, as the only way to get the country’s “hardcore poor, those with no skills and no opportunities” out of the poverty cycle.
Dominguez sees the bill as critical in enabling the government to raise an additional P718 billion for education, P139 billion for health, P267 billion for social protection, welfare and employment, and P1.73 trillion for urban and rural infrastructure.
President Rodrigo Duterte’s ambitious infrastructure program will hinge on the government’s ability to finance huge projects. It is a shot at finally reducing the poverty incidence in the Philippines and creating millions of job opportunities.
“By failing to act boldly at a most opportune moment, we will betray our people. We will condemn our nation to the vicious cycle of high inflation, high interest rates and inhospitable business conditions that we endured before,” Dominguez said.
The bill, along with the mammoth infrastructure plan, hopes to sustain the 7-percent to 8-percent economic growth rate and raise dramatically the investment level. Given the global trade headwinds in the face of US President Donald Trump’s protectionist stance, the Philippines will need all the buffer it can build to withstand external threats to the domestic economy.