Virata, other ex-economic ministers back DoF’s overhaul of tax system
FORMER economic ministers said they support the Finance department’s efforts to reform the tax system, including measures intended to offset lost revenue from reducing personal income tax rates, saying the initiative is “long overdue” and necessary to radically reduce poverty.
Fourteen ex-officials from the Department of Finance ( DoF) and five former heads of the National Economic and Development Authority (NEDA), in a joint statement, endorsed the DoF reform proposals, which are intended to put more money in people’s pockets, encourage investment, ultimately leading to the eradication of extreme poverty.
“We, the former Secretaries and Undersecretaries of the DoF and the NEDA fully support the DoF’s comprehensive tax reform program as a long-needed corrective to our tax system’s structural weaknesses and as a tool to achieve inclusive growth and transformative poverty reduction in our country,” the off icials said in the joint statement.
They added that “The DoF’s proposed comprehensive tax reform is progressive, timely, and well- crafted to achieve the vision of a prosperous Philippines free of poverty. For these reasons we strongly support the reform and urge the public to do the same.”
The Comprehensive Tax Reform Package — later rebranded as the Tax Reform Acceleration and Inclusion Act (TRAIN) — lowers personal income tax rates from the current top rate of 32%, to only 25%. It also adjusts tax brackets that have remained unchanged for decades, while offsetting a possible dropoff in collections by expanding the valueadded tax ( VAT) base, among others.
Offsetting measures also include the removal of some tax exemptions enjoyed by senior citizens and persons with disabilities (PWDs), and increasing the excise tax on fuel products and automobiles.
“We support the increase in oil and automobile excise taxes as a very progressive means of raising revenues and addressing the negative externalities of pollution and traffic congestion as families optimize the purchase and use of cars,” they said.
The lowering of the income tax rate is the first of five packages that the DoF hopes to pass. Succeeding packages include the lowering of the corporate income tax, adjusting real estate valuations, and a sugary drinks tax, among others.
The DoF has said that they expect package one to be approved this year, and implemented in 2018.
Although the proposal remains undiscussed in the House of Representatives since it was submitted in September, House Ways and Means Committee Chairman Dakila Carlo E. Cua told BusinessWorld previously that the tax reform package will be the first priority under his committee when regular Congress session resumes next week.
The former government officials said that “[t]he personal income tax reform is long overdue and is a welcomed move.”
The current tax rates are based on the 20-year-old National Internal Revenue Code, which has not been substantially modified since 1997.
They said that the “structural weaknesses” from the outdated tax system “make our economy less competitive relative to our neighbors and deprive our people of deeply needed investments to improve their lives.”
The joint statement was signed by former DoF secretaries Cesar E. A. Virata, who is also a former Prime Minister; Jose Isidro N. Camacho, Jesus P. Estanislao, Roberto F. De Ocampo, Jose T. Pardo, Cesar V. Purisima, and Juanita D. Amatong; and former NEDA directors-general Arsenio M. Balisacan, Emmanuel F. Esguerra, Cielito F. Habito, Felipe M. Medalla, and Romulo L. Neri.
It was also signed by ex-DoF undersecretaries Joel A. Bañares, Romeo L. Bernardo, Cornelio C. Gison, Lily K. Gruba, Milwida M. Guevara, Jose Emmanuel P. Reverente, and G. Florencia Tarriela.
The comprehensive tax reform package was introduced by former DoF Secretary Cesar V. Purisima before his term ended, and eventually turned it over to the incumbent Finance Secretary Carlos G. Dominguez III, who filed it with Congress in September. —