The success or failure of President Rodrigo Duterte’s government, as in any administration, will be measured on how it dealt with the economy, not on how it waged the war on drugs. Sustaining an economic growth rate of 6 percent to 7 percent implies more investments and increased job opportunities—key factors that will significantly alleviate the poverty incidence and bridge the income gap.
President Duterte has the opportunity to push the Philippine economy closer to the strides achieved by its Asian neighbors like Malaysia and Thailand. All he has to do is push the passage of tax reforms in Congress to raise revenues and finance an ambitious infrastructure program.
Domestic issues like the deadly drug war that has claimed over 7,000 lives, graft and corruption and President Duterte’s use of vulgar language in response to his critics, however, have sidetracked the progress of the tax bill that aims to raise an estimated P163 billion a year.
Foreign investors and funding institutions are monitoring the discussions on the tax reform bill. Investors and fund managers so far are not convinced that Congress will be able to pass the tax bill by June this year. Uncertainty over the fate of the new revenue measures has already weakened the peso past the 50-to-$1 level, leading to a higher inflation rate.
Proceeds from the tax reforms that seek to increase the rates on fuel and cars and at the same time reduce income taxes will form part of the revenues the government needs to bankroll the $160-billion infrastructure program. Raising the revenue collections of the government is a fiscal discipline that will eventually be rewarded by foreign investors and global financial institutions.
Foreign investors praised the decision of former President Gloria Macapagal-Arroyo to increase value-added tax during her term. That resulted in increased foreign investments, stable interest rates and prices and better investment-grade credit rating which, in turn, made the Philippines much more appealing to investors.
President Duterte has everything to gain once the tax reform package is passed into law. With increased revenues, his government will create more job opportunities, expand social services and minimize the drug menace.