SOCIOECONOMIC Planning Secretary Ernesto Pernia warned Tuesday the government may fail to sustain its planned spending under its ambitious infrastructure program as a result of the lower revenues arising from the removal of the value-added tax exemptions in the first package of its Comprehensive Tax Reform Program.
Following President Rodrigo Duterte’s request to speed up the first package of the CTRP proposed by his administration, Pernia said, the Philippines might resort to a lower-than-planned infrastructure spending after modifications were made to cut net revenue by as much as P82 billion from the P157.2 billion earlier estimated by the Finance Department.
“That’s a problem. We will not be able to fund the Build, Build, Build [or maybe] small build, small build, small build…or it can be no build, no build, no build,” Pernia said.
“With the modifications introduced by the House, it’s going to go down to P82 billion, so it’s about half. It’s not good. Congress should have passed it in toto.”
Pernia warned that the low revenues resulting from the modifications in the tax reform program would affect not only hard infrastructure but also the soft infrastructure, development programs, education and health.
Finance Undersecretary Karl Chua earlier last week said that, under a generalized repeal of the special laws on the VAT exemptions that the House members preferred, the revenue gains would be “difficult to ensure.”
Chua said another P10 billion in estimated revenues may be chopped from the automobile levy should the House push for another version that was estimated to yield P14 billion in the first year instead of P24 billion.
Pernia said that while it was not the end of the road should Duterte’s tax reform package fail to pass Congress before it recessed, there was a need to complement the losses in the first package through the three succeeding legislations.
He criticized the legislators blocking the administration’s original tax package.
“They should realize that we in the economic team, our interest is just the country’s development. The improvement of the society,” Pernia said.
“We do not have a personal agenda at all. We are trained to do economic analysis, tax analysis. We know what is optimal.
“I don’t think the legislators are as well-versed as the economic team. Some maybe experts but not as a whole. The economic team works as a whole, they should have trust in the economic team.”
Pernia said if the tax reform bills were passed, inflation would be around 1.4 percent by 2018 “but this will dissipate, it will not shock.”
Malacañang’s tax reform 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 the 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,” Finance Secretary Carlos Dominguez III said.
He warned of “dire consequences” in case Congress failed to quickly pass the proposed bill given its design to help guarantee a steady revenue flow for the Duterte administration’s 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.
