Financial road map

Question is, how do we fund this ambitious program?

The Duterte administration has rolled out a strategy of launching a massive infrastructure program, which his economic planners believe will be the linchpin to a sustained and inclusive growth.

We don’t have to be Nobel laureates to appreciate that. Question is, how do we fund this ambitious program?

Secretary Carlos Dominguez, who quarterbacks the Duterte economic team, has drawn a financial road map which, hopefully, will produce the desired robust revenue inflows.

“The objective is to reform our tax system so that it becomes fairer, simpler and more efficient.”

This he intends to achieve through a combination of tax reform measures (of course with the help of Congress) and improvements on the ease of doing business through more efficient and responsive governance.

The tax reform package is now pending with Congress. The tax reform proposal seeks to: 1. Lower personal and corporate income taxes. 2. Expand the VAT base by reducing the number of exceptions to the tax. 3. Adjust the excise taxes on petroleum. 4. Impose new excise tax on sugar-sweetened beverages.

Dominguez explains that lowering the tax base will greatly benefit the mass of wage workers who will consequently benefit from increased disposable income. It will also make our companies more competitive.

The latter four measures seek to compensate for revenue loss and collect additional taxes.

Directly under Dominguez are the Bureau of Internal Revenue and the Bureau of Customs which are the two principal national collecting agencies. The BIR collects three quarters of national revenue while the BOC collects one-fourth.

To the BIR, Dominguez has given these marching orders: “We have to grow our revenues faster. The current tax efforts among our neighbors run as high as 17 per cent. The first and last time we achieved that level was during the time of Commissioner Chato.”

To the BOC, which has consistently under-performed its revenue targets, his marching orders appear much taller: Address the huge discrepancy between the volume of imports reported by authorities and the figures actually reported by exporter-countries.

Admittedly, closing the gap will take some doing. Observers (including Reader Joe Lazar) suggest a relaxation of bank secrecy to cover fraud and smuggling cases.

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