NEW CLARK CITY—Secretary Carlos Dominguez III has bared plans for the Department of Finance (DOF) to work more closely with members of the incoming 18th Congress in passing further reforms that would set stronger economic foundations to sustain and even boost the country’s high and inclusive growth.
Dominguez reiterated during a legislators’ forum his proposal for a closer working relationship between President Duterte’s economic team and the new set of lawmakers “so that we can mutually move forward with legislation that really contributes to the common good.”
The DOF, Dominguez said, is currently reorganizing its personnel so it could assign more full-time directors and staff to engage with lawmakers on a weekly basis, with the goal of ensuring that the Legislative and Executive departments could mutually move ahead in passing laws to sustain high growth, attract more investments, create more jobs, and achieve financial inclusion for all Filipinos.
“Together, we can ensure the sustainability of the high and inclusive economic growth rate we enjoy today,” Dominguez said during the “Vision into Reality” forum organized here Tuesday for members of the House of Representatives in the next Congress.
“The matter is in your hands. All you have to do is ask us how we can help you, and together we can make a better life for the Filipinos,” added Dominguez.
In the forum hosted by stalwarts of various political parties, Dominguez also described the outgoing 17thCongress—which passed several game-changing reforms such as the Tax Reform for Acceleration and Inclusion (TRAIN) Act, the Universal Health Care (UHC) program, a new Sin Tax Reform Law that imposed higher taxes on tobacco products, and the law liberalizing rice imports—as among the most productive in the country.
The TRAIN Law, Dominguez noted, not only produced a more reliable revenue stream for government and provided solid footing for President Duterte’s “Build, Build, Build” infrastructure program, but also put more money in the pockets of 99 percent of Filipino workers in the amount of P111 billion combined, or the equivalent of a 14th month pay for taxpayers.
He said the congressional approval of the TRAIN Law was among the major considerations underlying Standard & Poor’s decision to raise the Philippines’ long-term credit rating from “BBB” to a higher investment grade of “BBB+” with a “stable” outlook, which is the highest that the country has received so far and only a notch below the coveted A rating accorded the world’s most stable economies.
Recently, Fitch Ratings affirmed the Philippines’ “BBB” rating with a “stable” outlook, which is yet another recognition of the government’s commitment to building a strong fiscal position, Dominguez said.
The TRAIN Law, Dominguez said, will help sustain fiscal stability for the country, just like the proposal in 2005 by Sen. Ralph Recto to reform the value-added tax (VAT) system now benefits the people, the government and the domestic economy by way of low borrowing rates.
He noted that from paying 4.7 percent in interest premiums in 2004, the Philippines now shells out only around 1 percent more than the normal interest rate that the United States pays, which means more money for the government to spend on its priority programs of infrastructure, education and healthcare.
The rice tariffication law, on the other hand, is another reform measure that has made rice more affordable to Filipinos, making retail prices cheaper by P10 per kilo than when market rates were at their peak last year, Dominguez said.
“Nobody mentioned the price of rice as a political issue (in the last elections) and that is because the rice business is now an ordinary business no longer controlled by the National Food Authority (NFA) or any other government agency,” Dominguez said.
In the 18th Congress, Dominguez said among the measures that the Duterte administration will push for swift approval are the remaining tranches of its comprehensive tax reform program (CTRP), which include those reducing the corporate income tax (CIT) and rationalizing fiscal incentives; reforming the property valuation system; rationalizing capital income taxation; imposing additional taxes on alcohol products; increasing the government’s share from mining operations; enacting a fair general amnesty law that also covers lifting bank secrecy rules in fraud cases and the adoption of the automatic exchange of information with treaty partners for tax purposes.
“Completing this (tax) reform will further secure our fiscal stability and help fulfill our shared goal of a decent and comfortable life for all law-abiding Filipinos,” Dominguez said.
Dominguez said the Foreign Investments Act, the Retail Trade Act and the amendments to the Public Service Act, will also be included in President Duterte’s legislative agenda for the next Congress, which opens on July 22.
The Finance chief said that as a result of the Duterte administration’s firm resolve to implement tax reform first before embarking on a massive infrastructure program, actual infrastructure disbursements reached 5.1 percent of gross domestic product (GDP) last year.
Dominguez pointed out that this marked the first time in the country’s history that infrastructure disbursements hit above 5 percent, as the average over the last four years was only 2.5 percent.
Within this year or early 2020, notwithstanding the adverse effects of the delay in the approval of the 2019 national budget, the Philippines is expected to ascend to “upper middle-income” country status two years ahead of schedule, Dominguez said.
“Disciplined management brought us to where we are now. We can secure a progressive and stable future if we work together at this critical juncture,” Dominguez told the lawmakers gathered at the forum.
“In the service of these shared goals, we are always ready to support your legislative work with both data and briefings,” Dominguez added.
Dominguez said that while the President signed several game-changing congressional measures in the 17th Congress, he also had to veto bills that would prove detrimental to the country’s fiscal position.
These included 147 bills that would have eroded revenues by P178 billion annually or mandatorily add P799 billion to the budget outlay, representing a cumulative financing impact of P977 billion–”clearly something we could not afford at this time unless we halt the infrastructure modernization program and return to stagnation,” Dominguez said. “These will clearly pull away funding for the poor and undermine the country’s fiscal position.”
On top of these measures, Dominguez said 31 other bills were proposed by lawmakers to create more tax-free freeports or ecozones, which would have added to the current number of 546 as of 2017, “all contributing to massive leakages.”
“We do not think this is how we should do policy. We hope the incoming legislators will find a better way to help localities prosper than the simplistic method of giving away taxes our people need,” Dominguez said.
The Finance chief said that the country was “able to claw its way out of the debt crisis by sustained commitment to fiscal discipline. This required government resisting the myopic seductions of populism in order to build a strong fiscal position.”
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