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Tax reform program to recast Philippine economic policy

MANILA: Despite the perceived misgivings on the capability of the Duterte administration to handle the national economy, an overall economic policy is evolving and getting clearer, as the ongoing consultation process among various sectors intensifies.

The team of economic managers, composed of Finance Secretary Carlos Dominguez III, Economic Planning Secretary Ernesto Pernia, Budget Secretary Benjamin Diokno, Trade and Industry Secretary Ramon Lopez, and Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr., has made the proposed Comprehensive Tax Policy Reform Program of 2016 the linchpin of the overall economic policy, which seeks to post an annual growth rate of 7% for the next 6 years.

The proposed tax reform program seeks to improve the tax system and provide revenue streams, raising an estimated P600 billion in new revenues every year to fund the slightly over P1 trillion investment requirements for the next six years.

The tax reform program envisions P400 billion of the P600 billion new revenues, or an additional 2% in Gross Domestic Product (GDP) through tax reform policies and the remaining P200 billion, or one percent of GDP, through improvements in tax administration. This includes spreading the tax net so that even those in the informal sector would be subject to taxation.

But the tax reform program does not only raise new taxes or provide steady revenue streams. It also recasts the overall economic policy environment by adopting a more inward-looking approach to favor import substitution, the same policy that characterized the postwar reconstruction period.