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Economic team guarantees protection for poor families

The Duterte administration’s economic team assured the poor and low-income households that they are protected from the impact of the proposed increase in fuel taxes under the comprehensive tax reform program.

According to the Department of Finance, they along with the Department of Budget and Management (DBM) as well as the National Economic and Development Authority (NEDA) are assuring the public that the proposed tax reform will not burden the poor individuals.

In a joint statement, the economic team said the government will introduce highly targeted, direct and indirect subsidies plus other social protection initiatives that should benefit poor and low-income families.

Finance Secretaries Carlos G. Dominguez III, Budget Secretary Benjamin Diokno and NEDA Director-General Ernesto Pernia said they will help cushion the impact of the proposed indexing to inflation of the excise taxes on oil products on “the poorest 50 percent of the population.”

Adjusting oil excise taxes on diesel, gasoline and other petroleum products is among the proposals under the first tax reform package submitted by the Duterte administration to Congress last month.

The proposal also includes the lowering of personal income tax rates, broadening the value added tax (VAT) base, and restructuring the excise tax on automobiles.

The officials said increasing excise on oil products is highly progressive as the top two million households — comprising only 10 percent of the total number of households in the country — consume almost 60 percent of oil products.

According to Dominguez, the government’s planned reforms in tax policy and administration, aims “to achieve a more efficient, equitable, and simpler tax system characterized by lower rates and broader base,” that will, in turn, “encourage investment, job creation, and poverty reduction.”

“The priority infrastructure, education, and health investments funded through tax reform will enable the country to lift 10 million Filipinos out of poverty by 2022 and eradicate extreme poverty by 2040.” Dominguez said.

The near-term goal of the Duterte administration’s tax reform plan, Dominguez said, is to raise R600 billion, which is about three percent of the Gross Domestic Product (GDP), by 2019 to help fund the 10-point socioeconomic agenda.

Of this amount, R400 billion (two percent of GDP) will come from tax policy reforms and another R200 billion (one percent of GDP) from reforms in tax administration.

Dominguez said reforming the tax system and protecting the country’s vulnerable sectors should go hand-in-hand in realizing President Duterte’s electoral mandate of making the benefits of economic growth felt by all Filipinos.

The adjustments in oil excise taxes and later indexing these to inflation, the expansion of the VAT base and the restructuring of the excise tax on automobiles are measures that would offset the revenue losses arising from the reduction of personal income tax rates.

He pointed out that adjusting oil excise taxes would remove the subsidy on fuel that is actually enjoyed mostly by the rich, and transfer this instead in the form of highly targeted assistance to low-income households and other vulnerable sectors.

“The incremental revenues will be used to fund the massive infrastructure needs of the country and the programs to develop our human capital and provide social protection for the poor,” he added.