(Eagle News) — Finance Secretary Carlos Dominguez III has called on lawmakers to proceed with approving the Duterte administration’s proposed reforms on corporate taxation and the modernization of investment incentives, which comprise the government’s second tax reform package.
In pushing for the passage of the next phase of the tax reform law, Dominguez said that TRAIN had been “unfairly blamed for the elevated inflation rate.”
He said the impact on prices of the first tax reform package only contributed less than a half-percentage point to last month’s inflation rate.
“TRAIN has been unfairly blamed for the elevated inflation rate we are currently experiencing. By our estimates, fully two-thirds of last April’s 4.5 percent inflation rate is typical of a rapidly expanding economy. The remaining is due mainly to the sharp increases in key imported commodities specifically oil, the realignment of currency exchange rates and a robust increase in domestic demand,” Dominguez said.
Dominguez said the first package—the Tax Reform for Acceleration and Inclusion (TRAIN) Law—accounted for only four-tenths of a percent of April’s inflation rate of 4.5 percent, which means that for every peso increase in prices, only nine centavos can be attributed to TRAIN.
“At any rate, the inflationary impact of TRAIN is expected to diminish over the next few months,” Dominguez said.
The Department of Finance (DOF) chief attended Tuesday’s first hearing called by the House Committee on ways and means to discuss House Bill No. 7458.
Rep. Dakila Carlo Cua, the committee chairman, along with Deputy Speaker Raneo Abu and Deputy Majority Leader Aurelio Gonzales Jr. filed HB 7458 that aims to lower the corporate income tax (CIT) and reform the investment incentives system. This measure comprises Package 2 of the Duterte administration’s tax reform program.
Before proceeding to call on lawmakers to support Package 2, Dominguez thanked the leadership and members of the House for passing the TRAIN, which, he said, has brought immediate relief to, and increased the purchasing power of, 99 percent of the country’s salaried workers in the form of personal income tax (PIT) cuts.
Moreover, the TRAIN also allowed the Bureaus of Internal Revenue (BIR) and of Customs (BIC) to exceed their respective collection targets for the first quarter of this year.
Dominguez likewise pointed out that the biggest impact of TRAIN is not on the prices of basic goods, but on non-essential commodities like tobacco and sugary beverages, whose tax rates have been made intentionally “punitive” to help safeguard the health of Filipinos.
To cushion the effects of elevated inflation on vulnerable sectors, Dominguez said the government is implementing the unconditional cash transfer program while encouraging more investments to meet the surge in domestic demand driven in part by the monetary windfall from the PIT cuts in TRAIN.
He said the first tax reform package provided funds to the government to help support its aggressive spending on infrastructure, education, health and social protection programs for the poorest of the poor.
Dominguez then urged lawmakers to approve Package 2 so as “not to stop the train from moving forward.”
“Revenue policies, after all, are not only about raising money to reduce deficits or meet our debt payments. More importantly, they are effective instruments for reducing poverty, investing in the future and fashioning a fairer society,” he said.
-Pro-business, pro-investments-
The finance chief said the “pro-business, pro-investments and pro-incentives” Package 2 will help the government build a fairer and more competitive business environment through reforms in the corporate tax system “that will deliver a more even playing field, simplify collection procedures, bring greater transparency and reward genuine efficiency.”
He said the overhaul of the corporate tax structure, particularly the system on the grant of investment incentives, are necessary given the defects that prevent the Philippines from attracting foreign direct investments (FDIs).
(with a DOF release)