The delayed passage by Congress of tax reforms will affect economic growth in the coming years, the National Economic and Development Authority said Wednesday.
Economic Planning Secretary and Neda director-general Ernesto Pernia said the 2018 government budget might be in peril, if the tax reform proposal of the Finance Department would fall behind schedule.
“[The non-passage of the tax reform proposal], will make the 2018 budget difficult. It remains uncertain. So, I don’t know the assumption to apply,” Pernia told reporters.
Pernia said the delay in the passage of the first package of the tax reforms might affect economic growth, which would be anchored on infrastructure spending. The government aims to boost infrastructure spending to at least 5 percent of gross domestic product.
The Development Budget Coordination Committee set an annual economic growth target of 6.5 percent to 7.5 percent in 2017 and 7 percent to 8 percent in 2018, faster than this year’s goal of 6 percent to 7 percent.
The enactment of tax reform proposal is now behind schedule in Congress. The Finance Department submitted a proposal to the House ways and means committee, a revision of the original package it submitted in September.
The first package of the DOF’s proposal included reduction in personal income tax rate, especially for low-income and middle-income workers and restructuring of excise taxes on certain products.
“They should be approved, to achieve a balance between reduction of revenue and compensation for the reduction,” Pernia said.
Pernia said the Supreme Court’s decision to restrain some provisions of the Responsible Parenthood and Reproductive Health Law could also affect fundamentals.
“[The] non-passage of the tax policy reform program [is a risk in the domestic front]. Another one would be the Supreme Court becoming adamant on keeping TRO [temporary restraining order] on certain things like RPRH law. These are real risks and and are man-made internal risks that hopefully can be surmounted with the strong hand of the president and his popularity,” Pernia said.
The Philippine economy grew 7.1 percent growth in the third quarter, bringing the average growth in the first three quarters to 7 percent.
Pernia said he expected a 6.9-percent GDP growth rate in the fourth quarter, driven by private consumption and robust infrastructure spending.
