WASHINGTON DC—The Philippines’ “unremitting” war against illegal drugs is but a part of a larger effort by President Duterte to assert the rule of law, break the stranglehold of organized crime in some institutions of the country, and win back the Filipino people’s respect for, and trust in, their government, Finance Secretary Carlos Dominguez III said Friday (Manila time) here.

Moreover, President Duterte is fully determined and capable of harnessing his immense political capital to boost growth, restore the rule of law, and maintain peace with neighbors, Dominguez said.

Dominguez told the Philippine Economic Roundtable gathering that now is an “opportune time” for country to achieve this goal as it “has a steely President intent on doing what needs to be done” to achieve a rules-based society and enforce laws to rid Government of corruption, protect the environment, and come up with an economy grounded on “explicit and reliable policies.”

“Over the short period this new government has been in power, it attracted the attention of the global media mainly because of its unremitting war against the drug syndicates. While undoubtedly photogenic, the war on drugs is just part of a larger effort to assert the rule of law, break the grip of organized crime on some of our institutions of governance and win back our people’s respect for the state,” Dominguez said at the forum held at the IFC Building here.

He cited a study on impunity conducted by the Unibersidad de las Americas in Mexico last year that showed the Philippines ranking highest in impunity.

“That means the laws are widely ignored. It means we do not need more laws; we need to improve on enforcement,” Dominguez said.

“The effort to rebuild the public order is only one component of a well rounded program of government advanced under the leadership of President Duterte,” he added.

On top of transforming the country into a law-abiding society, Dominguez also cited the Duterte administration’s parallel effort to attain peace with armed insurgents.

“Side by side with the efforts to restore public order, the new administration has revived peace talks with insurgent groups. Continuing talks with the Moro National Liberation Front and the Moro Islamic Liberation Front ensure that the level of violence in Mindanao will continue to decline in the coming year,” Dominguez said.

Dominguez added that, “Negotiations with the Communist Party of the Philippines-New People’s Army have been restarted with good offices provided by the Norwegian government. Given the initial talks, we are confident that a sustainable political settlement will be achieved soon.”

“President Duterte is a determined leader, capable of efficiently deploying the immense political capital he enjoys to break the vicious cycles plaguing our society,” he said.

Dominguez said that in step with his electoral mandate, President Duterte has put in place a 10-point socioeconomic agenda to maintain and enhance macroeconomic fundamentals responsible for high growth, and to raise public spending on priority programs that would transform the economy into a truly inclusive one.

The Philippine economic plan under this 10-point agenda, Dominguez said, is to attract investments and reduce poverty incidence by 9 percentage points or from 26 percent to 17 percent over the six years that Mr. Duterte is in office.

This plan might be described as an ambitious one, but there is a convergence of positive developments that makes it “achievable,” among them a benign inflation and interest rate regime plus a manageable national debt, complemented by improved credit ratings, the finance chief said.

“We will seize the opportunities offered by this beneficial convergence. At the same time, we will not relax on fiscal discipline,” Dominguez said.

“This (10-point socioeconomic) agenda intends, over the next six years, to maintain the macroeconomic policies that brought our economy to the robust growth we have maintained. At the same time, we are designing policies that will make our economic growth truly inclusive,” he said.

To address uneven development and reduce poverty, the Duterte administration will undertake massive investments in infrastructure, education, health, housing, and agricultural modernization, Dominguez said.

He said there would be a “real dispersal of investments,” especially in Mindanao, which is the main island in Southern Philippines that has “vast resources and the biggest headroom for new economic activities.”

Infrastructure spending would be increased to 5 percent of the Gross Domestic Product (GDP) over the medium term, which, with its multiplier effects, will help disperse economic activity and open opportunities for the country’s poorer provinces, Dominguez said.

He said this massive infrastructure program includes investments in inter-island transport, the modernization of our ports and airports, and the construction of new road networks.

“The entire economic program might be described as ambitious. But it is eminently achievable,” Dominguez said.

To help fund the infra buildup and other programs leading to inclusive growth, Dominguez said the government needs to overhaul its inefficient tax system.

Hence, he said, the Department of Finance (DOF) is pushing the congressional approval of a comprehensive program—dubbed the Tax Reform for Acceleration and Inclusion Act—that would start with lowering personal and corporate income tax rates, which are much higher than the regional average.

“It has encouraged evasion and a narrow tax base,” Dominguez noted.

He also noted that the Philippines has less than 3,000 corporate taxpayers being monitored by the Large Taxpayer Service of its Bureau of Internal Revenue.

“Only about three million individuals file annual tax returns. Our tax base is narrow and consequently our tax effort is lower than the regional average,” Dominguez said.

He said the goal of the DOF on his watch is to transform the country’s inefficient, unreliable tax system into an “instrument of economic inclusivity.”

“To support the massive economic investments we intend to make, we will quickly overhaul the revenue system. This will ensure our fiscal position remains strong even as we increase public spending to achieve a higher growth plane,” Dominguez said.

“We will improve tax administration, eliminate corruption by using ICT (Information Communication Technology) as a tool to improve tax administration,” he added.

The revenue erosion arising from lower income tax rates would be offset by improved revenue measures designed to spell a fairer, more equitable and more efficient tax system.

The DOF recently submitted to the House and the Senate its proposed Tax Reform for Acceleration and Inclusion Act in keeping with the Duterte administration’s 10-point socioeconomic agenda.

Dominguez said the DOF tax bill was completed after the Department consulted with members of the Cabinet, legislators, former Secretaries of Finance, prominent economists, stakeholder and business groups, and with various foreign embassies, global financial institutions and joint foreign chambers signifying their support for the tax reform proposal.

“‘Every measure lowering tax rates will be paired with a new measure broadening the tax base. By our estimates, the tax reform package we have brought to the Congress for legislation will effectively increase public revenues, thereby making more anti-poverty programs possible,” Dominguez said.

One such measure, he said, is the expansion of the value-added tax (VAT) base in order to improve collection and plug leakages.

“We will close loopholes in VAT system,” he said. “The Philippines imposes a 12% VAT rate while Thailand imposes a lower VAT rate at 7%. Yet both countries collect exactly 4.3% of GDP, as VAT. There is something wrong in the way we administer VAT. We intend to correct this as soon as possible.”

Such measures “will enable the Philippines to sustain a growth rate of 6.5 percent or better over the medium term,” he said.

“That is indispensable to achieving the goal of reducing poverty to 17 percent by 2022,” Dominguez noted.