THE proposed tax reform plan of the Department of Finance could be a “game changer” that will not just generate revenues but also raise enough funds to allow the government to address the backlog in physical and human capital investments, an independent policy think tank said Friday.
AER senior economist Jo-Ann Latuja-Diosana said at a tax forum that her organization is “very supportive” of the design of the DoF’s tax reform program as it focuses on how to make the current tax system more equitable, efficient, fair and progressive.
“While we are still working on the details, we see a lot of potential in this package and how it can really be a game changer for the country, AER senior economist Jo-Ann Latuja-Diosana said at a tax forum.
“Specially right now, we face a lot of constraints, specifically in infrastructure and investments in human capital, such as on health and education,” she added.
Diosana commended the DoF for presenting the package objective’s not just as revenue generation and upgrading of credit ratings but to generate funds. “That is really very important to us,” she said.
Finance Secretary Carlos Dominguez III, on the other hand, said the DoF was moving swiftly to propose reforms in the country’s 20-year-old tax system so that the government could raise enough funds for accelerated spending on infrastructure, human capital and social protection programs.
The Finance department submitted to the House of Representatives and the Senate its proposed Tax Reform Roadmap for Acceleration and Inclusion Act on Sept. 26 in keeping with the administration’s 10-point socioeconomic agenda.
Dominguez said the DoF tax bill was completed after the department consulted with members of the Cabinet, legislators, former finance secretaries, prominent economists, stakeholder and business groups, and with various foreign embassies, global financial institutions and joint foreign chambers signifying their support for the tax reform proposal.
Among the organizations at the forum were the Tax Management Association of the Philippines, Framework Convention Alliance of the Philippines, Friedich Ebert Stiftung, Bantay Kita, Coalition of Services for the Elderly Inc., Institute for Climate and Sustainable Cities, Philippine Coalition on the UN Convention on the Rights of Persons with Disabilities, Philippine College of Physicians Foundation, The Asia Foundation, Tobacco Free Kids, Universal Health Care Study Group, USAID-FPI, Woman Health Philippines, and the Freedom from Debt Coalition.
The first package of the proposed tax reforms that the DoF had submitted to Congress seeks to restructure the personal income tax rate; expand the value-added tax base by reducing the coverage of its exemptions; adjust the excise taxes imposed on petroleum products; and, restructure the excise tax on automobiles, except for buses, trucks, cargo vans, jeepneys, jeep substitutes, single cab chassis, and special-purpose vehicles.
The reforms in the PIT rate include adjustments in the income tax brackets to correct so-called income creeping; reduce the personal income tax maximum rate over time to 25 percent from 32 percent at present, except for highest income earners; and shift to a simpler, modified gross system.
According to the DOF, the tax policy reform plan is part of a broader reform program to help the country lift some 10 million Filipinos from poverty and become an upper middle-income country by 2022.
A comprehensive tax reform package that includes other measures will also augment the PHP1 trillion in investments needed to transform the country into a high-income economy in one generation or by 2040.