The TRAIN is moving

The Tax Reform for Acceleration and Inclusion or TRAIN bill is about to roll off with the ratification of the first package of the Duterte administration’s comprehensive tax reform program. This is a welcome development especially for millions of fixed-income earners who will enjoy significant reduction in their personal income taxes once the proposed bill is signed into law on Dec. 19. Those earning P250,000 or below annually will be exempt from paying income taxes.

As Finance Secretary Sonny Dominguez noted, this is a wonderful Christmas and New Year’s gift that government can give to Filipinos because this will mean more disposable income for them. Sonny enjoys a very high trust rating with many Filipinos and happens to be a very close personal friend of the President.

Aside from seeking to achieve a simpler as well as fairer and more efficient tax system, the proposed bill also adjusts taxes on automobiles (under a four-tier scheme), tobacco, coal (with a three-year gradual increase on taxes to P150 per metric ton) and sugar-sweetened beverages, among others. Unfortunately, not everyone is happy with the final version of the first tax reform package due to concerns that it could make the country less attractive to certain potential investors especially with regard to the excise tax on sugar-sweetened beverages. There may be avenues to amend it later on.

I totally support the initiative of Finance Secretary Sonny Dominguez in pushing for the bill that will generate a hefty P130 billion revenue for the government’s anti-poverty program and partly finance its ambitious infrastructure project. According to Socioeconomic Planning Secretary Ernie Pernia, the tax package will boost the revenue-to-GDP ratio of the country. He urged Filipinos to support tax and regulatory reforms to sustain and to boost economic growth that the Duterte administration is working hard to achieve by bridging the massive infrastructure gap through projects that can bring progress and development to many areas outside of Metro Manila.

The recent upgrade of the Philippines’ credit rating from “BBB-“ to a stable outlook of “BBB” by international debt watcher Fitch Ratings is a solid vote of confidence in the country’s growth prospects and a recognition that the Philippine economy is now stronger and more resilient than ever. Aside from the massive infrastructure program, the anticipated passage of the tax reform bill is also another reason why Fitch decided to upgrade the country’ credit rating – affirming that the economic policies being undertaken by the administration are sound and sensible. Moves to lift various economic restrictions in the foreign investment negative list (FINL) to ease the entry of foreign investments in the areas of trade, retail, public utilities, infrastructure contractors and others is also being anticipated, with NEDA pushing for aggressive liberalization of the FINL.  

No doubt the Philippines is one of the best performing economies in Asia as shown by the better than expected 6.9 percent expansion of the economy in the third quarter. The Asian Development Bank also upgraded its growth forecast for the Philippines from 6.5 percent to 6.7 percent for 2017, and from 6.7 percent to 6.8 percent for 2018 on assumption that the government’s infrastructure program will accelerate. All of the above substantiate a very bullish outlook as far as the Philippines is concerned.

One of my main tasks here in Washington, D.C. is to build upon the strong foundation of the long-standing relationship between the Philippines and United States to achieve a common future of mutual prosperity. Our messaging has been, and will continue to be, that the Philippines remains open for business and that we can find synergies and partnerships to help in the Duterte administration’s “Build Build Build” infrastructure program.

We had quite a busy week here in D.C. meeting different business groups that include the US-ASEAN Business Council (US-ABC) headed by its president and CEO Alex Feldman who worked during the administrations of George Bush Sr. and Jr. and has a deep understanding of Asia where he lived for more than a decade.

Alex noted that both the US and the Philippines can build on the “positive nature” of the meeting between presidents Trump and Duterte in Manila during the ASEAN Summit to further strengthen commercial, trade and investment ties. I was also pleased to meet Vance Hum, the CEO of I.M. Systems Group and his wife Imelda Martin (a Filipina from Isabela) during the US-ABC lunch meeting that was attended by diplomats, US government officials and members of the US business community.

Jim Fatheree, the acting head of Asia International Affairs Division of the US Chamber of Commerce, also hosted a welcome lunch for us with John Goyer and Javiera Gallardo of the USCC and representatives from private businesses that include JJ Ong of Chevron, David Short of FedEx and Emily Beline of FedEx Express, David Myers of Medtronic, Amy Roberti of Procter & Gamble, Desiree Green of Prudential Financial and Citibank’s Michael Bates.

The US Chamber of Commerce is the world’s biggest business federation representing the interests of over three million businesses – big and small and from various sectors and regions. It was reassuring to hear Jim affirm that, “as the Philippine economy continues to grow, American businesses are optimistic about new market opportunities and encourage continued progress on economic reform.”

The US business community is definitely an important part of the economic and political equation for both the United States and the Philippines. With the winter cold now setting into the East Coast, I can sure use the warm welcome shown to me by our friends here in Washington, D.C.

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