10M poor families to get doles after fuel tax OK

By Luis Leoncio

The government would provide additional cash doles to the 10 million poorest families, aside from their regular stipends under the Pantawid Pamily­ang Pilipino Program (4Ps), once Congress approves the Department of Finance (DOF) proposal to increase the ex­cise tax on oil products.

Finance Undersecretary Karl Chua said the cash sub­sidy would be for one year; the amount has yet to be deter­mined but it would be enough to cover the anticipated in­crease in prices of basic com­modities and services.

Chua, during the House ways and means committee hearing last Wednesday on the proposed tax increase, said the additional cash transfers would ensure that the poor would not suffer from the pro­posed 10-percent increase in excise tax on oil.

Chua said 40 percent of the targeted 10 million families that would be covered by the non-conditional cash transfer are those that are already en­roled in the 4Ps.

He said the difference with the fuel cash subsidy is that it would be provided “with­out any conditions,” unlike the cash transfers under 4Ps in which the recipients would have to meet a set of condi­tions on children’s schooling and maternal health.

He said the proposed cash-transfer program would be financed by the higher tax revenues from excise tax on oil.

”This is to bridge the gap and is not a permanent pro­gram. It’s not the solution by itself,” he said, adding that the “real solution” to alleviate the lives of the poor is to ensure the continued expansion of the domestic economy by building more infrastructure and to en­sure inclusive growth.

Chua said the higher ex­cise tax on oil would increase inflation rate by about 1.5 per­centage point but prices over­all would remain manageable since the average rate of price increases in the country re­mains below the government’s 2- to 4-percent target until 2019. He said the inflation rate averaged only 1.8 percent last year.

He said the 1.5-percent projected uptick in inflation as a result of higher excise tax on oil products would bring the average inflation rate to 3.3 percent.

”This is still low and sus­tainable,” he said.

Chua said the first pack­age of the DOF’s Compre­hensive Tax Reform Program (CTRP), which was submitted to Congress in September 2016, has considered sectors that would be affected by the oil excise-tax increase, such as drivers of public utility vehicles, areas being serviced by small power-utility groups (SPUG) or areas that are not yet connect­ed to the main power grid due to their location.

SPUG areas, the mis­sionary areas of the National Power Corp. (Napocor), are serviced by providers that use diesel-powered electricity sources.

Chua said that since SPUG areas have subsidized rates, they would not be affect­ed that much. However, he as­sured lawmakers that the DOF continues to coordinate with all stakeholders to ensure that the impact of the proposed tax in­creases will result in net gains for the poor and the govern­ment.

He said the Duterte ad­ministration needs to raise some P366 billion a year over the medium term, of which some P206.8 billion is expect­ed to come from tax reform in the first full year of imple­mentation, for it to mount an unprecedented investment strategy that would finally put the Philippines on an “irrevers­ible” path to high and inclusive growth.

Chua said that only with this sizable increase in rev­enues, can the government meet its goal of drastically re­ducing poverty and transform­ing the country into an upper middle-income economy in 2022, by spending big on in­frastructure, human capital – education, health, life-long training, and research and de­velopment (R&D)- and social protection for the poor and other vulnerable sectors.

“However, without this planned investment buildup via tax reform, the government will merely ‘muddle through’ and cannot meet the prerequisites to high and inclusive growth, which are a growth rate of at least 7 percent per year, and driven by investments rather than by consumption,” Chua said.

The CTRP is embodied in House Bill 4774 filed by Rep. Dakila Carlo Cua, who is chair­man of the ways and means committee.

Chua said computations made by the DOF and the House panel showed that im­plementing the revised tax-re­form plan, if approved before June this year, would yield a net gain of P41.5 billion in the second half of 2017.

Legislated reforms in tax administration, if enacted on time, would also raise P48.1 billion more in the second half of 2017, he added.

The start of the full im­plementation of tax policy reform in 2018, which would net P162.5 billion, along with another P44.3 billion for that year from legislated tax ad­ministration reform, would raise a total of P206.8 billion, Chua said.

In its statement last De­cember 20, the Develop­ment Budget Coordination Committee (DBCC) said the “projected proceeds from the tax-reform package—around P206.8 billion–would fund the government’s big-ticket development projects, partic­ularly the infrastructure pro­gram.”

Finance Secretary Car­los Dominguez III is confident the first tax reform package would be approved by the House panel before the end of the month.

Dominguez said that “in the medium-term, tax reform is expected to help reduce the poverty rate from 21.6 per­cent in 2015 to 14 percent in 2022, lifting some six million Filipinos out of poverty, and helping the country achieve upper middle-income country status where per capita gross national income increases from $3,550 in 2015 to at least $4,900 by 2022, close to where Thailand is today.”

Once this momentum is sustained, he said, the coun­try would be well on its way to becoming a high-income economy by 2040, with a per-capita gross national income of a least $11,000, which is where Malaysia is right now, he added.

“To protect the poor and vulnerable, highly targeted transfers and subsidies will be provided as part of the ramp up of social spending from 37.3 percent of the 2016 budget to 40.1 percent of the 2017 budget,” Dominguez said.

Chua said the revised tax-reform package, which covers the lowering of per­sonal income tax (PIT) rates and a corresponding set of revenue-compensating measures, would correct the flaws in the tax system.

The House-modified Tax Reform for Acceleration and Inclusion (Train) plan retains the DOF proposal of exempt­ing from PIT payments those with a net taxable income of P250,000 and below and simplifying tax payments in order to increase the take-home pay of most Filipino taxpayers and make the sys­tem fairer and more equita­ble. The P82,000 exemption for 13th month and other bo­nuses will remain.

The revised package also includes lowering the rates for estate and donor’s taxes, expanding the value-added tax (VAT) base, but retaining the exemptions enjoyed by senior citizens and persons with disabilities, adjusting au­tomobile and fuel excise tax­es.

Complementary reforms to this revised tax package include introducing the tax on sugar-sweetened beverage, indexing the motor vehicle user’s charge to inflation, and granting an amnesty to past estate-tax cases.

The estate tax, which is a tax imposed on the privilege of transmitting properties upon the death of the owner, would also be reduced from the current maximum rate of 20 percent to 6 percent under the revised tax-reform plan.

The revised plan also in­cludes legislated administra­tive reforms in the bureaus of Internal Revenue (BIR) and of Customs (BOC) such as fuel marking to prevent smug­gling, the use of e-receipts, the mandatory connection of the point-of-sale system to the BIR, and the relaxation of bank secrecy laws for inves­tigating and combating tax fraud.

The Duterte administra­tion’s target is to ramp up spending on infrastructure to P1.83 trillion, education and training to P1.27 trillion, health to P272 billion and so­cial protection, welfare and job generation for the poor­est of the poor to P509 billion by 2022 for a total amount of P2.2 trillion in investments.

This would mean an esti­mated additional investment of P1.07 trillion for infrastruc­ture, P718 billion for educa­tion, P139 billion for health, and P267 billion for social protection each year over the next six years, Chua said.

“Tax administration, which includes improve­ments in both the BIR and BOC is equally important and is in fact the priority for 2017 before the tax policy re­forms are fully implemented in 2018,” Chua said.