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Philippines: Economic managers welcome Train Act
Economic managers on Tuesday welcomed President Rodrigo Durterte’s signing of Republic Act 10963 or the Tax Reform for Acceleration and Inclusion (Train) law, which they claimed would usher in “real positive change” in terms of the country’s development.
Finance Secretary Carlos Dominguez 3rd described the law’s approval as a “sign of maturity” for the Philippine economy, which he claimed was now ready to meet the challenges of fixing structural problems and taxation inequities.
“It is also the first of five packages that will once and for all start fixing the structural problems of the tax system that has become unfair, complex and inefficient. This tax reform will also raise the revenues needed to make real positive change for our people,” he said.
Dominguez also claimed that this was the first time for Congress to approve a tax reform bill that was not in response to a crisis or external pressures.
The law, which provides for personal income tax (PIT) exemptions for the first P250,000 of taxable income, along with other significant PIT cuts for other tax brackets, provides Filipino taxpayers with “much-needed relief” after 20 years of no adjustment on the rates, he said.
Preliminary computations show the government would be giving “almost P150 billion” back to the people in the form of tax relief, Dominguez added.
“This is the biggest Christmas and New Year’s gift that the Duterte administration is giving to the people,” he declared.
The measure also raises “significant revenues” that will fund the President’s priority and social infra programs and reduce poverty from 21.6 percent to a targeted 14 percent by 2022, the Finance chief said.
Seventy percent of incremental revenues under the Train will help support the government’s infrastructure modernization program while 30 percent will fund, among other anti-poverty measures, a targeted cash transfer program for the poorest 10 million households.
The estimated inflationary impact of 0.9 percent will slightly go down to 0.7 percent, Dominguez also claimed, which would have an even more minimal effect on food, electricity and transportation costs.
The Train law’s approval puts the Duterte administration “on track to meet its revenue targets” as expected revenues amount to some two-thirds of that projected under the original Finance department version.
The balance of one-third is expected to be passed by the Congress in early 2018, Dominguez said.
This remainder involves an estate tax amnesty, a general tax amnesty, proposed adjustments to the Motor Vehicle Users Charge and changes to the bank secrecy law and the automatic exchange of information.
Socioeconomic Planning Secretary Ernesto Pernia, for his part, said the Train law’s implementation would increase the spending capacity of the average working Filipino, boost the revenue-to-gross domestic product (GDP) ratio and fund government’s infrastructure and human capital investment program.
“As we look forward to Train implementation next year, we will continue to rally for the full implementation of the CTRP (Comprehensive Tax Reform Program) to promote equity and raise the needed revenues for government’s programs and projects, especially in infrastructure, education and health,” he said.
According to the National Economic and Development Authority that Pernia heads, real GDP will be higher by 0.5 to 1.1 percent by 2022 if the CTRP is fully implemented.
London-based research consultancy Capital Economics, meanwhile, said the signing of the Train Act was President Duterte’s most important legislative achievement since he took office last year.
In a report, the firm said implementation of the law would likely push up inflation.
“That said, the overall impact is likely to be relatively small given that the changes are set to be phased in over several years. The Department of Finance has estimated that the tax hikes will add 0.4 percentage points to the headline rate next year,” it said.
Source: http://www.manilatimes.net/economic-managers-welcome-train-act/369709/