Keynote speech of Finance Secretary Carlos Dominguez
Joint Assembly of Financial Institutions held on Feb. 13, 2020
posted February 20, 2020 at 12:40 am
In addition, some of these firms cheat the government of some 63 billion pesos by abusing transfer pricing rules or by shifting profits and costs to reduce tax liabilities. The total is a staggering 504 billion pesos in one year alone. That amount is equivalent to around 93 percent of the Department of Education budget and more than 5 times that of the Department of Health in 2017. In other words, we have to account for the 504 billion pesos that we gave up and ensure that the taxpayers’ hard-earned money was not wasted.
CITIRA, by contrast, adopts the best practices, such as those in Malaysia, Thailand and Singapore, to ensure a truly contested market that will benefit consumers and ensure that the healthiest enterprises survive. Moreover, this reform measure will create about one and a half million jobs for our people.
We also expect the Passive Income and Financial Intermediary Taxation Act or PIFITA to be a game changer when it is passed later this year. This reform will make the country more attractive for long-term investments.
PIFITA will fix a complicated tax structure by cutting into half the 80 combinations of tax base and tax rates on passive income and financial transactions. The complicated tax structure makes tax administration and compliance difficult and costly for both government and the private sector.
It will also remove the tax on initial public offerings and reduce the stock transaction tax from six tenths of one percent to one tenth of one percent to further encourage capital market expansion. Low- and middle-income earners will benefit by way of reducing the tax burden on their bank deposits, insurance premiums, and other passive investments. PIFITA will allow our country to be more competitive in attracting capital and investments to finance large-scale public and private-sector projects that create jobs and boost the economy.
Meanwhile, the real property valuation reform bill aims to adopt globally benchmarked standards and inculcate a higher degree of professionalism in property valuation. These, in turn, will promote investor confidence in property markets. It will likewise enhance the revenue-generating capacities of our local governments. As a beneficial side effect, it will help clear right-of-way issues currently inhibiting many key infrastructure projects.
While we await the passage into law of these remaining tax reform packages, we continue to implement measures that will invigorate our capital markets, boost investor confidence, and enhance financial inclusion.
After 11 long years, we have finally released the set of regulations that will allow the Real Estate Investment Trust or REIT to finally take off. It will democratize wealth by opening access to thousands of small investors wanting to be shareholders in secure and profitable real estate projects. In turn, this will allow big players in real estate to raise up more capital to further invest in our country, a win-win situation for all.
REIT is a powerful financial instrument that will boost investments in property development while ensuring that funds raised using this mechanism are reinvested exclusively within the country’s real estate and infrastructure sectors, thereby ensuring that the money invested by Filipinos will stay in our domestic economy.
More recently, the Philippines issued its lowest and first ever zero-coupon Euro Global Bond in the international capital markets. The overwhelming response from the market for our 3- and 9-year global bond issuance worth 1.2 billion Euros underscores the international investor community’s deepening confidence in the Philippine economy.
The wider public also patronized the first-time sale of our Premyo Bonds last year, enabling us to raise 4.96 billion pesos or over 65 percent more than the initial issue size of 3 billion pesos. Access to the bonds were made easy and convenient through the use of online purchasing platforms. These bonds open yet another channel for ordinary Filipinos to be included in the financial mainstream.
The continuing review of government contracts is an effort to protect taxpayers and ordinary citizens from onerous provisions. This review sends a clear message that this government is determined to create a pro-business environment in the country. But while the government is interested in inviting businesses to our economy, the interests of the whole nation should be a primary consideration.
The most recent independent, professional surveys find President Duterte’s job approval ratings at unprecedented high levels during the second half of his term. That should not be surprising. The key reforms already in place, and the ones forthcoming, have produced a pro-people economy and tangibly improved quality of life at the grassroots.
We will pursue the socioeconomic reform program of President Duterte with a decisiveness that this administration proved it can deliver.
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