DOF challenges CTRP critics: Present alternative tax plan

MANILA, Philippines -  The Department of Finance (DOF) challenged yesterday critics of the Comprehensive Tax Reform Program (CTRP) to come up with an alternative tax plan that can benefit low and middle-income taxpayers and raise revenues at the same time.

“We welcome criticisms and challenge critics to provide us a coherent and sustainable revenue-generating program that would be efficient and fair for everyone,” Finance assistant secretary Paola Alvarez said in a statement.

“The DOF will more than welcome sound suggestions aimed at reducing poverty and providing us lasting solutions to the country’s massive infrastructure gap,” she added.

The first package of the DOF’s CTRP aims to lower personal income tax rates and reduce donor and estate taxes, while adjusting fuel and automobile excise taxes and expanding the value-added tax (VAT) base.

Critics have argued the government should just lower the income tax rates, without pursuing other revenue-generating measures.

But Alvarez said such actions would be “anti-poor” as it would lead to “massive” revenue losses.

She said CTRP is needed to raise sufficient revenues to fund P8 trillion to P9 trillion needed by the government to ramp up its infrastructure spending and social protection services over the medium term.

“The CTRP aims to provide inclusive growth that would lay down the foundation for the country to be an upper middle-income country like Thailand by 2022 and a high-income country like Malaysia by 2040,” she said.

She said while tax administration reforms in the Internal Revenue and Customs bureaus can indeed increase government revenues, it “will never” be sufficient to back the infrastructure spending program of the Duterte administration.

The DOF official also pointed out official development assistance provided by other countries would not be enough to advance infrastructure development in the country.

Moreover, she said a simpler tax system as proposed under the CTRP would help prevent corruption, non-compliance of tax payments, and therefore curb collection leakages.

“The simpler the tax system, the more efficient and equitable it is, the easier to collect and stamp out corruption and tax evasion. In this regard, both tax policy and tax administration are our priorities,” Alvarez said.

Meanwhile, former finance secretary Margarito Teves, along with other sectoral leaders have expressed support for CTRP’s provision to adjust petroleum excise tax and index it to inflation.

“Strictly on the proposed excise tax on fuel products, I support the staggered increase as proposed by the Department of Finance,” Teves said.

Economist Jo-Ann Latuja Diosana, citing Action for Economic Reforms’ position paper, claimed that the taxes on petroleum products would not only compensate from the loss from personal income tax reform, but also effectively raise domestic resources.

International Tax and Investment Center senior advisor Wayne Barford also backed the reform.

“We support the approach of the DOF. We look forward to good tax reform in the Philippines,” he said.