More tax reforms needed for fiscal sustainability: Dominguez

FILE: Finance Secretary Carlos Dominguez III at the 51st Asian Development Bank Annual Meeting on May 25, 2018 (Photo: Department of Finance/Facebook)

MANILA — Finance Secretary Carlos Dominguez III has high hopes that additional tax reform measures will be passed to generate funding for the government’s infrastructure program and ensure fiscal stability.

In his speech during the joint membership meeting of several business organizations in Taguig City on Friday, Dominguez noted the passage of several tax reform bills in the first three years of the current administration has funded many key projects.

He said the first tranche of the tax reform program, the Tax Reform for Acceleration and Inclusion (TRAIN) law that was passed in late 2017, “provided solid footing for our spending program”.

TRAIN has cut workers’ tax rates, exempting those earning PHP250,000 and below annually from paying income tax, but hiked excise taxes on fuel products and introduced excise tax on sugary drinks, among others.

“The TRAIN Law not only produced a more reliable revenue stream for government but put more money in the pockets of our people,” Domiguez said.

The Finance chief said that additional revenues from the said law allowed the government to increase infrastructure spending to PHP886.2 billion, or about 5.1 percent of domestic output, in 2018.

“This is the first time in the Philippines’ history that our infrastructure disbursements hit above five percent of GDP (Gross Domestic Product).

This provides solid proof of the better absorptive capacity and disciplined execution by our infrastructure agencies,” he said.

Similarly, a measure to increase taxes on tobacco products was approved by senators last Tuesday and subsequently concurred by the House of Representatives.

Dominguez said economic managers are hopeful that this measure will be enacted soon because the additional revenues will be used to fund the Universal Health Care (UHC) program, which requires an estimated PHP1.4 trillion budget over a five-year period.

Other reforms that economic managers are pushing for include the cut in corporate income tax and rationalization of fiscal incentives.

Dominguez said the proposed reforms “will give us a good chance of reaching single A rating within the next two years”.

The country was first elevated to investment grade in 2013 and steadily made its way up the economic rating scale, including the record highest rating from Standard and Poor’s this year.

Last May 31, Fitch Ratings affirmed its long-term foreign-currency issuer default rating on the Philippines at ‘BBB’, with Stable outlook, due to prospects of sustainable growth.

Last April, S&P Global Ratings upgraded the country’s credit rating from ‘BBB’ to ‘BBB+’, a notch shy of the A grade, with a Stable outlook.

Dominguez said the current government is committed on boosting the domestic economy’s chances of rising to upper middle income status, which is expected to finally come true later this year.

“Disciplined management brought us to where we are now. It will secure for us a progressive and stable future,” he added.