It may not be palatable to the ordinary Filipinos. It could even reduce the popularity of President Rodrigo Duterte. But the tax reform package passed by the House of Representatives on final reading is one bill that will eventually fund multi-billion peso infrastructure projects, create more economic opportunities in the Philippines and generate jobs.
House Bill 5636, or the Tax Reform for Acceleration and Inclusion, proposes to impose additional taxes on fuel, sugar, motor vehicles and even lottery winnings, and lower personal income taxes on the side. In all, the package is estimated to yield net revenues of P300 billion a year, and support the annual budget onward.
The bill will certainly increase the prices of petroleum products by P6 a liter over three years, make vehicle purchases in the country costlier, and at the same time exempt workers earning P250,000 and below for the years 2018 and 2019 from paying personal income taxes.
The new tax package is a bitter pill aimed at strengthening the economy and preserving recent gains. As in the expanded value added tax (E-VAT) law in 2005 that widened the coverage of the sales tax to include petroleum, electricity, non-basic commodities, and domestic travel by air and sea, the new tax package aims to correct weaknesses in the economy and move the Philippines closer to the progress achieved by its neighbors in Southeast Asia.
The E-VAT law passed during the second term of then President Gloria Macapagal Arroyo trimmed the country’s large budget deficit, boosted foreign investments, strengthened the peso and enabled the economy to grow above seven percent. The expanded sales tax later led to successive credit rating upgrades that made the Philippine economy one of the fastest-growing in the world during the term of then-President Benigno Aquino III.
Recent economic strides, however, were not inclusive. They failed to make a dent on the poorest of the poor. Lack of infrastructure such as road, bridges, airports and seaports prevented those in the countryside from gaining access in order to sell their produce to the market, usually found in urban centers.
We hope the additional revenues from the new tax reform package would be a major source of funding to bridge the economic divide in the Philippines.