Tax reform ‘key link’ to breaking low-growth cycle – Dominguez

MANILA - The proposed comprehensive tax reform program pending i n the Congress is the “key link” for the Philippines to break the low and non- inclusive growth c ycle, Finance Secretary Carlos Dominguez III said.

In a statement released by t he Department of Finance on Wednesday, the Finance chief noted the Duterte administration’s plan to ramp up spending on infrastructure and human capital, along with its goal to lower income tax rates to boost the country’s global competitiveness, would require additional revenue measures that could only be generated through the tax reform program.

“Realigning income tax rates, however, will bring down revenues even as we improve tax administration and broaden the tax base. This means we have to introduce new revenue measures that will not only compensate for lower tax rates but also fund the massive infra program t hat commences now,” Dominguez said.

“The CTRP, therefore, is the key link in the grand effort to break out of the cycle of l ow growth and build a dynamic and inclusive economy for our people,” he noted.

“It is a pro- active and pro- poor measure t hat supports the expansionary fiscal posture of the present administration,” he added.

The Finance chief said the tax reform program is an “audacious strategy” that seeks to lift our country to upper middle-income status by 2022 and high- income status by 2040.

“Our personal and income tax rates are higher than the rest of the region. We cannot expect companies to set up

shops here if we tax them more than our neighbors do,” he added.

The country should move decisively in carrying out the “grand effort” given the convergence of positive factors such as the economy’s low- interest rate regime, excess liquidity, benign oil prices, investment-grade credit rating, a young, vigorous work force and the strong support of countries like Japan and China.

Dominguez said t he administration’s 10- point socioeconomic reform agenda takes into account those positive factors, but the accompanying opportunities will bear real fruit “only if they are undertaken by audacious policy-making.”

This reform agenda, Dominguez said, includes an infrastructure buildup that entails trillions of pesos in investments that are necessary to help ensure the next generation of Filipinos do not remain “in the same poverty trap we found ourselves in.”

The Philippines lost out on competitiveness “in the decades when we neglected our infra while our neighbors rapidly built up theirs,” he said. “For an archipelagic country, poor infrastructure is debilitating. It raises the costs of transporting good between islands,” the DOF chief noted.

“That is the reason our food price regime is high. Our congested roads and ports discouraged investors who need to operate on just-on-time deliveries. Our high power costs and unstable supply discouraged investments in manufacturing,” Dominguez said.(

PNA)