5.1% GDP expansion enough to sustain economic growth
FINANCE Secretary Carlos Dominguez III yesterday said that given the Philippine economy's strong performance in the first two quarters of 2016, the country needs to sustain an above-5 percent expansion in its Gross Domestic Product (GDP) this second semester for government to achieve its growth target of 6 to 7 percent for 2016.
While acknowledging that the new government's tax reform plan could lead to a temporary erosion in revenues, Dominguez said in an interview that the countermeasures that would be put in place for the remainder of the year would. In the long run, pump more funds into the state coffers to offset such projected revenue loss.
The Duterte administration plans to cut personal and corporate income tax rates, which is among the highest in the region, to increase tax compliance and grow a robust middle class.
"Most likely we will hit our targets for the year. We need only to grow 5.1 percent for the next two quarters to achieve between 6 and 7 percent for the whole of 2016," Dominguez said.
Besides implementing countermeasures, Dominguez said lowering corporate income tax rates would help attract foreign investments and build capital, along with government initiatives to relax foreign ownership limits by amending the Constitution.
“We are preparing our tax reform program that will actually lower tax rates for individuals as well as corporations,” he said. “However, we have countermeasures to cover those erosions in revenue, and they will certainly, we’ll end up with more revenues in the long run.”
To encourage investors to relocate in the country, Dominguez also said earlier that the government is “eyeing higher oil excise duties plus fewer Value Added Tax (VAT) exemptions, rationalizing other fiscal incentives, enhancing collection by revenueearning agencies, and improving the ease of doing business” in the country.
With the President supporting moves to amend the Constitution, “among the items that he has put on the table are liberalizing the foreign investment laws in our country,” Dominguez said.
He added: “We are looking towards increasing the amount of allowed foreign investments in nationalized industries, and we believe that will be a boost to our foreign direct investments.”
Earlier, Dominguez said last quarter’s 7 percent GDP growth would enable the new administration to keep its growth targets on track for the rest of the year and in 2017.
Dominguez said that with the growth momentum of the Philippine economy remaining strong, the Duterte administration would build on previous efforts to effectively implement its 10-point socioeconomic agenda.