Finance chief hopeful 18th Congress will pass tax reform bills

MANILA, Philippines — The Finance department is hopeful that the Philippines' recent credit rating upgrade will persuade the next Congress to pass tax reform measures that will benefit the public. 

Global credit watchdog Standard & Poor's (S&P) has upgraded the Philippines' credit rating to "BBB+" with a stable outlook, just a step lower than an "A" grade. S&P attributed the upgrade to the Philippines' consistent economic growth, the sound external settings of its economy and its solid fiscal accounts.

A credit rating reflects a borrower's ability to manage and pay back its debt. A rating upgrade is expected to lower borrowing costs and to make it easier for the private sector to tap international funding sources. 

Finance Secretary Carlos Dominguez said lawmakers who passed the first package of the tax reform program made the credit upgrade possible. 

"I'm sure that the Senate and the House — Senate, in particular — can see the benefits of what they did. They are the ones who enabled this credit upgrading by passing the bills," Dominguez said in a press briefing in Malacañang.

"There are positive benefits from this. And I hope that, you know, with this credit rating upgrade recently, the Senate will really consider passing these bills that will redound to the benefit of the Filipino people," he added. 

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Dominguez said the tax reforms enabled the government to save P3 billion in just one bond issuance this year, an amount that he said would be spent on social services like education and health care.  

"Following the success of the TRAIN (Tax Reform for Acceleration and Inclusion) law in lowering personal income taxes and bolstering revenues, the passage of the Trabaho bill and other tax reform packages will complete the process of making our tax system fairer, simpler, and more efficient," he added.

Lower income taxes, new fuel taxes

The first package of the TRAIN, which was signed into law in 2017, lowered income tax but imposed new taxes on diesel, liquefied petroleum gas, kerosene and bunker fuel for electricity generation and higher taxes on other oil products.

It also slapped a P6/liter tax on drinks containing caloric or non-caloric sweetener and a P12/liter tax for drinks containing high fructose corn syrup or combination. 

Officials have defended the measure, saying it would generate P120 billion in additional revenues that would fund key infrastructure projects. 

The remaining tranches of the tax reform program, however, are facing an uncertain fate as some senators are worried that the measures might raise further the prices of goods.

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The Trabaho bill, formerly known as the package 2 of TRAIN, seeks to cut corporate income tax rates from 30 percent to as low as 20 percent to make them closer to regional averages. It also aims to remove unnecessary tax incentives enjoyed by some businesses.

Dominguez said President Rodrigo Duterte remains supportive of the tax reform measures. 

"The president has always been intervening here. He’s not disengaged. He is very engaged in this tax reform program. In fact, as I mentioned, without his investing his political capital, we would not have been able to pass this. And he has assured us that he will continue to support this tax reform program," the Finance chief said.