The Daily Manila Shimbun


Duterte certifies tax reform bill as urgent: finance department

May 29, 2017

Following a request from the Department of Finance, President Rodrigo Duterte certified  on Monday  as an urgent measure for congressional approval the eight-month-old Tax Reform for Acceleration and Inclusion Act . "We are transmitting this letter of President Rodrigo Roa Duterte certifying to the necessity of the immediate enactment of House Bill No 5636 (the proposed Tax Reform for Acceleration and Inclusion Act…” Executive Secretary Salvador Medialdea said in his letter to Speaker Pantaleon Alvarez dated May 29. “The benefits to be derived from this tax reform measure will sustainably finance the Government’s envisioned massive investments in infrastructure thereby encouraging economic activity and job creation, as well as fund the desired increase in the public budget for health, education and social programs to alleviate poverty,” Duterte said in a separate letter sent to Senate President Aquilino Pimentel III. Presidential Legislative Liaison Office head Adelino Sitoy was furnished copies of the letter. Finance Secretary Carlos Dominguez III made this appeal in a memorandum to Duterte in the hope the House of Representatives, from where all tax and budget laws originate, could pass the measure, which is the first package of the Comprehensive Tax Reform Program (CTRP), before Congress goes on its sine die adjournment on June 2. Both the House and the Senate will reopen for the second regular session of the 17th Congress on July 24, when Duterte is to deliver his second State of the Nation Address (SONA). “We believe that the President’s certification of the tax reform bill as an urgent legislative measure can help ensure timely and full passage of the tax reform package before the close of the session on June 2, 2017, so that the benefits of the reform can be felt sooner,” said Dominguez in his memo to the President. The measure aims to make the country’s tax system simpler, fairer and more efficient, especially for the poor and low-income families, by making sizable cuts in personal income tax  rates—and to make up for the projected revenue loss, and at the same time raise funds for the Duterte administration’s massive expenditure program, by expanding the Value Added Tax (VAT) base and adjusting excise taxes on oil, automobiles and other products. Dominguez pointed out in his memo the “dire consequences” of the Congress’ failure to pass soon enough this bill. The finance secretary said without the TRAIN bill, the government’s strategy to embark on an aggressive expenditure program by raising deficit spending to three percent of the Gross Domestic Product (GDP) would lead to an “unsustainable fiscal position,” which, in turn, could trigger a credit rating downgrade possibly costing the government an extra P30 billion in annual debt servicing and P100 billion more in higher borrowing costs for the public. Such a scenario, he said, could leave the government “more vulnerable to fiscal risk” because it would adversely affect the funding source for increasing state liabilities such as the pension of uniformed personnel and indigent senior citizens.  With many countries including China being downgraded, this tax reform bill serves as our country's immunization from such threat. DMS