DOF: Tax reform to bridge income gap among regions

The Duterte administration’s proposed tax reform package would raise enough revenues for programs meant to bridge the chronic income gap between Metro Manila and the other regions, the Department of Finance (DOF) said.

Finance Spokesperson Paola D. Alvarez said the additional funds to be raised by the government would not only offset the revenue erosion from the planned personal and corporate income tax cuts, but would also fund the government-set higher spending on infrastructure.

“The comprehensive tax reform program of the Duterte administration would allow us to generate funds that we can use to invest in areas where the per capita income is lowest in the country,” Alvarez said.

She compared, for instance, the per-capita Gross Regional Domestic Product (GRDP) for 2015 in the National Capital Region, which is highest at R398,985 and the Autonomous Region in Muslim Mindanao (ARMM), which is lowest at R26,757 in current prices.

The per capita GRDP for ARMM was a measly seven percent of that of NCR’s, which is nearly three times the national average of R131,026 and nine percent higher than in 2014 based on current prices.

Compared to Calabarzon (Cavite, Laguna, Batangas, Rizal and Quezon region), which has a per capita GRDP of R145,859 and the Cordillera Administrative Region (CAR) with R131,110, both in 2015, ARMM remains at the losing end.

“The government will do more to help the regions that are lagging behind in terms of development. We need to reinvigorate the economy in areas outside NCR by increasing spending in regional infrastructure and social protection programs,” Alvarez said.

She said that under the proposed R3.35-trillion “Budget for Real Change” of the Duterte administration, underspending, which has hampered the implementation of social protection programs for the poor, would be a “thing of the past.”

The new government, Alvarez noted, plans to cut personal and corporate income tax rates, but it also needs to generate more revenues to effectively implement its 10-point socioeconomic agenda to ensure that the benefits of economic growth would be felt by majority of Filipinos.

“Such revenues would be used to invest heavily in education, health, infrastructure, and in effectively implementing the Reproductive Health Law in areas outside Metro Manila,” Alvarez said.

“This administration will make the right investments to raise the skills of our labor force, create jobs, stimulate the economy and improve the quality of life of the poorest of the poor,” she added.

Alvarez recalled that Finance Secretary Carlos Dominguez III had informed lawmakers that to help fund the massive plans under the Duterte presidency, the government would raise the budget deficit to three percent of the GDP, which will “substantially be offset by lower debt service.” (CSL)