MANILA, Philippines – The Department of Finance (DOF) said the proposed tax reform program would help the Duterte administration free six million Filipinos from poverty over the next six years.
Finance Secretary Carlos Dominguez said the approval by Congress of the proposed tax reform program would help the government reduce the poverty level to just 14 percent.
Dominguez said the Philippines is now at a critical juncture where it could either choose the old and easier path of sustaining high growth accompanied by economic exclusion and high poverty rates, or the new and more challenging road to reforms that would ensure high growth with equity for all Filipinos.
“Our mandate is to take on the more challenging path. Building on solid fundamentals, we must immediately bring relief to all Filipinos burdened with oppressive tax rates,” he said.
The DOF chief said the government should raise enough revenues to close the infrastructure gap that makes production costlier in the Philippines than in other countries in the region.
Dominguez said there should also be enough revenues to provide the social protection needed by the poor and vulnerable.
Dominguez said the government must take advantage of “the beneficial point in our country’s economic history,” characterized by the following positive factors: abundant capital, low interest rates, benign inflation, high business confidence, impressive credit ratings and strong regional support.
“This is the time to act boldly,” he said.
Over the next six years, the government intends to reduce poverty rates from the current 21.6 percent to 14 percent to bring the Philippines on par with Thailand and China in terms of per-capita gross national income by 2022.
“That translates into liberating six million Filipinos from the grip of poverty. We intend to transform our country from a lower middle-income to an upper middle-income economy. That will mean raising per-capita gross national income from $3,100 to $4,000 by 2022. That is the level of Thailand and China today after decades of sustained economic expansion in those economies,” Dominguez said.
If this momentum is sustained, Dominguez said by “the end of this administration, the Philippines should be well on its way to eradicating poverty completely by 2040 or a generation hence.”
“By that time, we should have moved into the ranks of the world’s advanced nations with a per-capita income of $12,000. This is where South Korea and Malaysia are at today,” the finance chief said.
To achieve these goals, Dominguez said the Philippines must sustain a growth rate of at least seven percent annually for a generation, which could be done only if the economy shifts from consumption- to investment-led growth.
He noted the Philippines currently invests only 20 percent of its gross domestic product (GDP) while its high-growth neighboring economies invest between 30 percent and 40 percent of GDP.
“Studies show that in order to sustain high and inclusive growth, we need P1 trillion more in investment on top of the current P1.3 trillion. Expanded direct investments from our neighbors, a more aggressive public-private partnership program, and deepened social protection and human capital investments will ensure that,” Dominguez said.
These investments, he said, require a series of revenue-enhancing packages, the first of which was submitted to the Congress last September under the DOF-proposed Tax Reform for Acceleration and Inclusion Act that aims to generate a net gain of P174 billion, equivalent to one percent of the GDP in 2018.