By Yasuyuki Sawada

ADEQUATE government revenues are critical for a country’s development, and the Philippines is no exception. Improving infrastructure, reducing poverty and inequality, and investing in health and education — all require strong public finances. The Asian Development Bank estimates that the Philippines will need to invest about 7% of GDP annually in infrastructure alone to support the country’s rapid growth. The Duterte administration is targeting reaching that level of infrastructure investment by 2022, more than doubling it from less than 3% of GDP on average over the past two decades.

At present, the Philippine government’s revenues are just under 20% of GDP, well below the 25% of GDP average for developing Asia and the 36% of GDP average for advanced economies. Ensuring adequate revenues — one of the key features of a good tax system — is one of the primary motivations behind the government’s five-part tax reform program. The tax reform and improvements in tax administration aim to raise up to 3% of GDP annually in additional revenues, with 70% of this earmarked for infrastructure and 30% for social spending.

Just as important as mobilizing revenue, however, is ensuring that the tax system works well. There are several other features of a good tax system beyond revenue adequacy. These are equity, efficiency, competitiveness, stability and predictability, ease of administration and compliance, and the need to ground policies in evidence. Let’s see how the tax reforms, and particularly the second legislative package known as TRAIN 2, fare along these seven dimensions.

Oftentimes when people think of equity in taxation, they focus