Higher revenue, reforms to bring down poverty by 2022: DOF exec

Lambino said the latest drop of poverty incidence in the country showed that about 5.9 million Filipinos have been lifted out of poverty, near the current government’s target of 6 million by the end of its term in mid-2022. (File Photo: Brian Evans/Flickr, CC BY-ND 2.0)

MANILA – Higher government revenues, easier conduct of business, more efficient tax administration, and healthier people will help bring down poverty incidence by 2022.

These characterize the results of some of the Department of Finance’s (DOF) programs under the Duterte administration so far this 2019.

“Despite the combined challenges of a re-enacted budget for 4.5 months and the global trade tensions, the Department of Finance and its attached agencies did very well this year,” DOF Assistant Secretary and Spokesperson Antonio Lambino II told the Philippine News Agency (PNA).

The DOF executive said the agency fared well in working with lawmakers for, among others, the passage of additional sin taxes, heated tobacco products, and e-cigarettes for the Universal Health Care (UHC) program.

In the agency’s accomplishment report for this year, the DOF said state revenues, for one, continue to increase with the help of the Tax Reform for Acceleration and Inclusion (TRAIN) Law, which was signed into law on December 19, 2017.

Aside from increasing the take-home pay of employees who have an annual income of PHP250,000 and below, this measure provides funding for the government’s priority infrastructure program called Build, Build, Build program and the fuel marking program, which started in the second half of 2019 and is targeted to address oil smuggling.

Another first for the country is the excise tax on sugar-sweetened beverages (SSBs), which is primarily a health measure aimed at curbing the consumption of sugary drinks.

In the first half of this year, revenues from this measure amounted to PHP55.6 billion, or 65 percent up compared to the 2018 figure.

Gains from this particular measure have been noticed by other governments in the region and the DOF said Vietnam and Indonesia plan to follow its implementation.

Another achievement for the agency this year is the signing of another hike in tobacco excise tax last July through what is now known as Republic Act (RA) 11346, the second increase so far under the current administration.

This measure will help finance the government’s Universal Health Care (UHC) program, which provides low-income Filipino families access to quality and affordable health services.

Another plus for all Filipinos this year is the institution of the Rice Tarriffication Law (RTL), which liberalized rice importation – a bid started about 30 years ago.

After high domestic rice prices pushed inflation up to as much as 6.7 percent in 2018, this law boosted supply and addressed food-related inflation upticks.

The rate of price increases has decelerated to as low as 0.8 percent in October this year and has started to normalize after rising to 1.3 percent last November.

The DOF has reported that domestic rice prices declined by about PHP10 per kilo compared to the 2018 level.

While the higher importation has initially hurt domestic rice farmers, the government has assured the sector that at least PHP10 billion annually will be allocated for the sector through the Rice Competitiveness Enhancement Fund (RCEF) to help lift palay harvest by way of low-interest loans, farm equipment, high-yield seeds, and skills training.

With the various tax measures and collection enhancement programs, the proportion of tax to gross domestic product (GPD) has improved to 14.7 percent last year from 14.2 percent in the previous year.

As of end-September this year, the tax-to-GDP ratio further rose to 15.7 percent, the highest first quarter to third-quarter level in 22 years.

Debt consolation has also resulted to drop in the debt-to-GDP ratio to 41.9 percent in 2018 from a high of 74.4 percent in 2004 and this is seen to drop further on various fiscal measures.

These measures are seen to elevate the country’s credit rating not just simply to investment grade, which was first achieved in 2013, but to ‘A’ level.

This year, the country got its first-ever ‘BBB+” rating, the highest B-level rating from S&P Ratings.

The government is now preparing to graduate from the highest B-level investment grade rating to ‘A’ level through better fiscal discipline and a modern financial system.

Lambino said the government has also started targeting erring foreign workers like those involved in the Philippine Offshore Gaming Operations (POGO).

Finance Secretary Carlos Dominguez III said POGO service providers in the country are subject to income tax and value-added tax (VAT) and their workers should be properly registered.

Lambino said all these measures are being done to support the administration’s goal to increase revenues to finance its infrastructure program and bring down poverty incidence to just 14 percent by 2022.

As of 2018, the country’s poverty incidence has declined to a low of 16.6 percent.

Lambino said the latest drop of poverty incidence in the country showed that about 5.9 million Filipinos have been lifted out of poverty, near the current government’s target of 6 million by the end of its term in mid-2022.

“We need to stay on track towards achieving that ultimate goal and even surpassing it,” he added.

With these achievements, Rizal Commercial Banking Corporation (RCBC) chief economist Michael Ricafort gave the DOF a 90 percent rating for this year.

He explained that the Finance Department has “done a great job in helping expedite various tax/fiscal reform measures in recent years.”

He said the increase in excise taxes of alcohol and tobacco products will help boost recurring sources of tax revenues.

“Further structural improvements in the government’s recurring tax revenue collections to help narrow the budget deficit and further improve the government’s overall fiscal management/performance, thereby could support further upgrades on the country’s credit ratings,” he said.

The economist is hopeful that lawmakers will okay the proposed bill that targets the gradual reduction of corporate income tax rates from 30 percent to 20 percent over 10 years.

This bill along with the proposed fiscal rationalization measure “would be needed in able to provide greater certainty on investment decisions by both local and foreign locators,” he said.

Ricafort said additional sin taxes can still be approved “as local sin taxes have yet to catch up with other ASEAN/Asian countries and increase funding for the government’s Universal Healthcare Program.”

He is also optimistic about the eventual approval of the real property valuation reform bill, eyed to generate additional revenues for local government units (LGUs).

Gains from these measures will also help the government compensate private property owners whose lands will be affected by the government’s infrastructure projects “in able to somewhat reduce delays in the rollout/implementation of various infrastructure projects,” he added.