THE Asian Development Bank (ADB) said the focus of tax reforms on increasing the excise on key goods will make the system less regressive, helping improve the business environment while sustaining growth.
In a recent meeting with Finance Secretary Carlos G. Dominguez III, ADB President Takehiko Nakao expressed his support for the department’s comprehensive tax reform program — which is now at Congress as House Bill 4774 — saying it will help ensure the government succeeds in its 10-point socioeconomic agenda.Mr. Nakao was quoted in a Finance department statement that the increases in petroleum and automobile excise taxes are a “progressive tax measure.”
The Department of Finance (DoF) said that the increase in the fuel and auto excise taxes are intended to correct inequitable features of the current tax system.
Finance Undersecretary Karl Kendrick T. Chua reported previously that the net effect of the tax reform program would benefit the poor the most.
In the proposed reduction of personal income tax rates, the top 1% of taxpayers will see their incomes decrease, while the remaining 99% will see their take-home pay rise.
In oil excise rates, the DoF said that those who consume more will have to pay more than those who consume less, noting that the top 10% of households consume 51% of the country’s fuel, while the top 1% households consume 13%.
The tax reform package also proposes targeted transfers to the poor to offset the increase in transport fares.
The DoF also proposed higher excise taxes on more expensive cars compared with those imposed on cheaper models.
The department plans to use the tax reform’s net gain of P162.5 billion to fund infrastructure projects.
“If successfully implemented, the new government’s development agenda to step up spending on infrastructure, implement tax reforms, and cut red tape will sustain high growth rates and increase job creation,” said ADB country director for the Philippines Richard S. Bolt in the statement.
The tax reform program aims to lift 6 million people out of poverty by 2022, and bring the poverty rate to 14% from 21.6% in 2015, with the hope of eradicting poverty by 2040.
