Ex-DOF secretaries urge Senate to preserve tax reform objectives

Former high-ranking officials of the Department of Finance (DOF) appealed to the Senate to preserve the revenue requirements under the Duterte administration’s Tax Reform for Acceleration and Inclusion Act (TRAIN).

According to former Finance Secretaries Roberto de Ocampo, Margarito Teves and former Undersecretary Romeo Bernardo, the revenue proceeds from the TRAIN bill will support the government's massive investment program for high and inclusive growth.

De Ocampo, a member of the Foundation for Economic Freedom (FEF), said he is supporting the proposed bill in its original form as the measure would improve tax compliance, and bring in more investments that would create more jobs, thus benefiting the country’s underprivileged sectors.

Bernardo, meanwhile, appealed to the Senators “to preserve as much as possible the original revenue requirements” under the original TRAIN as proposed by the DOF.

Based on DOF’s latest preliminary estimates, Senate Bill No. 1592 would yield only R59.9 billion in fresh revenues, well below the Duterte administration’s target of at least R134 billion.

Bernardo noted the government is facing growing funding requirements owing to the law on providing free tuition and other fees for enrollees in state universities and colleges, the pensions for uniformed personnel and the increased social security benefits for retirees.

Likewise, Teves underscored the “importance and urgency” of passing TRAIN in its original form to “enable the government to finance our growing needs as a developing country.”

Teves said the government needs funding to accelerate infrastructure development, close the gaps in health and education, improve social protection programs for the poor and marginalized while staying within the manageable deficit level of not more than three percent of the economy.

The original DOF proposal for TRAIN aims to lower personal income taxes while raising an additional R157 billion in net incremental revenues during the first year of its implementation in 2018. The House version approved a R134 billion package.

Former Socioeconomic Planning Secretary Felipe Medalla said the TRAIN is necessary to maintain the Philippines’ debt-to-gross domestic product (GDP) ratio and reduced cost of borrowing, which is now even lower than that of Malaysia and Indonesia and on par with Thailand.

Moreover, Medalla, who is currently a member of the Monetary Board, said tax reform will shift the burden of paying income taxes from salaried workers to the rich.

According to the FEF, “the comprehensive tax reform program will allow every Filipino an equitable opportunity to contribute to a sustained and truly inclusive economic growth.”

FEF, an advocacy group for good economic performance and marketfriendly reforms, is among the 200 organizations and institutions that have expressed their support for TRAIN.

It noted that, "With the right set of policies and programs that create an enabling environment for private sector investments, the Duterte administration can achieve its growth target of at least 7 percent annually.”

FEF added the Philippines will also “reduce poverty from 21.6 percent to around 13 percent to 15 percent, and significantly reduce unemployment rate over the next six years.”

“Fiscal stability, sustained funding for government programs, and investment-friendly tax policies can help the government attain these objectives,” FEF said.

The entire TRAIN package can help raise the additional one trillion pesos needed annually to fund investments in infrastructure, education, health, social protection, training, and research and development, FEF said.