Tax re­form or pur­ga­tory for the Philip­pine econ­omy

Manila Times - - FRONT PAGE - BY YEN MAKABENTA

First read

I - nance Sec­re­tary Car­los Dominguez de­clared that the Philip­pines is en­joy­ing a “Cin­derella mo­ment” to­day. The Congress should seize the mo­ment to pass the pro­posed com­pre­hen­sive tax re department has laid out as the core of

the ad­min­is­tra­tion’s eco­nomic pro­gram. If the coun­try is Cin­derella, what is the

In two ma­jor state­ments in four days—one at the Manila Times busi­ness fo­rum last Fri­day (Fe­bru­ary 10), and the other at a hear­ing of the House ways and means com­mit­tee on Mon­day (Fe­bru­ary13)— Sec­re­tary Dominguez all but de­clared that the CTRP is the magical slipper that will trans­form the coun­try into a 21stcen­tury econ­omy.

Bet­ter than drug killings, fed­er­al­ism and an in­de­pen­dent for­eign pol­icy, tax re­form will un­leash na­tional en­er­gies for eco­nomic ex­pan­sion and trans­for­ma­tion.

Build­ing a 21st cen­tury econ­omy

im­por­tant Cabi­net post is Sec­re­tary of equals. Dominguez told the Times fo­rum.

The gov­ern­ment will spend big not only on in­fra­struc­ture and so­cial skills train­ing in or­der to prime the coun­try’s youth for the chal­lenges of a glob­ally com­pet­i­tive job en­vi­ron­ment.

Dominguez stressed the ur­gent need for gov­ern­ment to im­prove the job-re­lated skills of young Filipinos be­cause our ever-ex­pand­ing la­bor force is one com­par­a­tive ad­van­tage that can en­able the Philip­pines to neigh­bors and bet­ter com­pete with them for for­eign in­vest­ments.

- ing a de­mo­graphic ‘sweet spot’ where mil­lions of young Filipinos will be join­ing the work­force. We need to train them in the high skills re­quired for a 21st cen­tury econ­omy.” - ing high growth and mak­ing it truly must spear­head ef­forts to make growth in­vest­ment-led rather than con­sump­tion-led.

The ad­min­is­tra­tion’s am­bi­tious spend­ing on three key ar­eas–in­fraand so­cial pro­tec­tion–would en­able it to re­al­ize its in­clu­sive-growth agenda and re­duce the rate of poverty in­ci­dence from the cur­rent 22 per­cent to - ment must be armed with am­ple rev­enues to im­ple­ment its ground­break­ing pub­lic in­vest­ments pro­gram. department is crit­i­cal.”

Dominguez dis­closed that even if the BIR and the cus­toms bureau ac th­ese would still not be enough to fund the gov­ern­ment’s pub­lic in­vest - over the medium term.

The in­fra­struc­ture gap raises costs all around and pre­vents our econ­omy from be­ing fully com­pet­i­tive. This com­pounds the poor in­vest­ment rate.

Tak­ing the more chal­leng­ing path

In his state­ment be­fore the House Dominguez was more em­phatic and com­pre­hen­sive in sell­ing the tax re­form pro­gram.

are at a crit­i­cal junc­ture to­day. The eas­ier path is to con­tinue with ex­ist­ing poli­cies that might bring high growth that will also sadly main­tain high poverty and eco­nomic ex­clu­sion. The more chal­leng­ing path is to re­form the growth hap­pens with eq­uity.”

this not only be­cause it was a cam­paign eco­nomic sense.”

The suc­ceed­ing pack­age un­der the CTRP aims to lower cor­po­rate into our econ­omy if our tax rates are sub­stan­tially higher than those of neigh­bor­ing economies. We seek to bring in­come taxes from the top rate of 32 per­cent to a more rea­son­able 25

The re­duc­tions in in­come taxes will be ac­com­pa­nied by a cor­re­spond­ing set of rev­enue-com­pen­sat­ing mea taxes on fuel and au­to­mo­biles and en­joyed by se­niors and per­sons with dis­abil­i­ties.

He warned leg­is­la­tors that un­less - those with no skills and no op­por­tuni

Tax re­form will en­able the gov­ern­ment to raise an ad­di­tional P718 and P1.73 tril­lion for ur­ban and ru­ral in­fra­struc­ture.

Dominguez summed up his mes be sus­tained by at least 7 per­cent. With­out a dra­matic in­crease in in - pur­ga­tory for an econ­omy with great po­ten­tial.”

The ar­gu­ment for lower in­come tax relief from high in­come tax rates. We can­not at­tract the in­vest­ments we need un­til we align our cor­po­rate tax rates with the re­gional av­er­age.

re­form will broaden the tax base and in­tro­duce new rev­enue mea­sures.

The en­tire tax re­form pack­age must be passed to en­sure the needed gains in rev­enues to fund the am­bi­tious pub­lic in­vest­ments pro­gram of the ad­min­is­tra­tion

Dominguez painted a dire sce­nario if Congress chooses to pass only the pop­u­lar re­duc­tion of the per­sonal - ing rev­enue-en­hanc­ing mea­sures.

- tary is echoed by for­eign banks and the credit rat­ing agencies.

Net ad­di­tion to eco­nomic growth

Deutsche Bank projects that the tax re­form pro­gram will add an­other 0.2 ppt to the 7 per­cent to 8 per­cent out­look in 2018.

- vel­op­ment to a low-in­come coun­try with one of the high­est in­come tax

The Philip­pine gov­ern­ment will face mar­ket scru­tiny over its abil­ity to shore up rev­enues this year even

- ment would prompt re­vi­sions of the coun­try’s credit rat­ings.

- nomic per­for­mance in 2017 will de the con­tain­ment of po­lit­i­cal risks in the coun­try.

Fit­ting the nation’s foot in the glass slipper is not a shoo-in. Cin­derella will have to un­dergo the rigor of re­form.

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