1
By 2022
3,996
USD
3,500
USD
at least
12,376
USD
3,500
USD
Progress in achieving the 10-point
socioeconomic agenda is advancing strongly.
19
GDP growth has remained robust
despite headwinds in the global economy.
40
With higher growth, the Philippines is likely to
become an upper-middle income country next year.
Poverty reduction is encouraging.
28.6 27.9
26.3 27.6
21.0
15.0 14.0
12 16 20 24 28 32
Pov erty ra te (p er cen t)
First semester poverty estimates among the population
2006 basket based series 2012 basket based series
Source: First Quarter 2019 Social Weather Report, Social Weather Stations 42
Self-rated poverty: Families who are “mahirap”, Philippines, April 1983 to March 2019
Rice liberalization is
pro-consumer pro-farmer
pro-taxpayer pro-workers pro-children pro-poor
Photo: IRRI
Rice liberalization reform is a game-changer.
The next three years will be focused on
achieving entirely the 10-point socioeconomic agenda.
44
Development objectives in next three years.
• The overarching objectives for the next three years are to:
Some economic priorities in next three years
1. Accelerate implementation of the Build Build Build infrastructure program.
• We have achieved 5.1 percent of GDP budget on infrastructure and we are on track to achieve 7 percent of GDP in infrastructure spending in three y a s’ time. This is consistent with achieving an 8 percent GDP growth.
46
● Hybrid PPPs
● Improve pre-planning
● Involve LGUs in identification and strategic planning of projects
● Upgrade technical capacity of LGUs to deliver local infrastructure
● Land valuation reform to resolve right-of-way conflicts
● National Land Use Plan to implement proper
zoning
Some economic priorities in next three years
2. Pursue the remaining tax reform packages to make the tax system simpler, fairer, and more efficient, while ensuring sustainable financing for the infrastructure
program. Four major packages remain:
Package 2
Corporate income tax and incentives reform
Package 3
Property valuation
Package 2+
Alcohol excise Package 4
Capital income and financial
taxes
Some economic priorities in next three years
3. Pursue economic reforms to increase FDI and jobs. Priority bills include
• Amendment to the Public Service Act
• Opening up retail trade further
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Some economic priorities in next three years
4. Improve implementation of existing reforms such as
• National ID
• Ease of doing business
• Universal health care
• Rice liberalization
• Social programs to increase investment in health, education, and social protection
• Building resilience to climate change
Some economic priorities in next three years
5. Improve the productivity of agriculture, including distribution of individual titles to land reform beneficiaries.
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Tax reform is about INVESTING
in our country’s FUTURE.
Why tax policy reform is needed: A bad tax system
52
Inflation
Special treatment and exemptions
Lack of
information (e.g., bank secrecy)
Inequity
Complexity
Inefficiency High tax rates
Narrow base (only about half of the economy
is taxed)
Cause Effect Outcome
Duterte Administration’s
Comprehensive Tax Reform Program
55
CTRP estimated revenue collection
(2018-2022)
0.4
1.0 1.0
0.7 0.6
3.5
0 1 2 3 4
2018 2019 2020 2021 2022 2018 to 2022
Percent of GDP
CTRP revenue estimates, 2018 to 2022
Source: DOF staff estimates
Notes: The blue bars represent annual estimates , while the green bar represents the combined 5-year estimate.
Tax reform is expected to raise 3.5 percent of GDP annually by 2022.
Package 1
Tax Reform for Acceleration
and Inclusion (TRAIN)
59
Shift to a simplified PIT system, and reduce the max
rate to 30% over time.*
Restructure the tax for self-employed to an optional flat tax of 8%.
Reduce and restructure th d n ’s tax t a
single rate of 6%.
Reduce and restructure the estate tax to a
single rate of 6%.
Broaden the VAT system by reducing the number of exemptions.
Increase the excise tax on petroleum products gradually.
Simplify excise tax on automobiles.
Introduce a tax on sweetened beverages.
Introduce and update taxes on: cosmetic procedures, coal excise, mining, tobacco, foreign currency deposits, capital gains, stock
transactions, and documentary stamp taxes.
VAT comparison with
other countries
Widening the VAT base by reducing exemptions
The number of lines of VAT exemptions in the NIRC slightly increased due to:
i) The adoption of some special laws such as the VAT exemption of senior citizens and PWDs in the NIRC,
ii) The introduction of VAT exemptions on association dues, transfer of property if in pursuance of a plan of merger or consolidation, and hypertension, high cholesterol, and diabetes medicines, and iii) The movement of the sale of gold to BSP from a VAT zero-rated to a VAT exempt transaction.
Despite this slight increase, the number of exemptions in special laws has been substantially cleaned up, resulting in the significant decrease in the total number of exemptions.
62
TRAIN
Package 2
Corporate income tax and incentives reform
68
The Philippines has the highest corporate income tax rate in the ASEAN region, yet it has low efficiency.
• For instance, Thailand collects CIT equivalent to around 4 percent of GDP on a 20 percent CIT rate, or an efficiency of 20 percent.
• Meanwhile, the Philippines collects CIT equivalent to 3.7 percent of GDP on a 30
percent rate, or an efficiency of only 12.3 percent.
• Among the ASEAN5, the
county is only ahead of
Indonesia in terms of
The President may advance the scheduled reduction in the CIT rate when adequate savings are realized from the rationalization of fiscal incentives.
Lower corporate income tax
70
- 14 investment promotion agencies
- 136 investment incentive laws and 200 non-
investment incentive laws
- 546 ‘ecozones’ and freeports We grant the most
generous fiscal incentives since
they are in lieu of all taxes and given
forever.
We have a complex tax incentives system.
● Firms with no incentives pay the regular rate of 30% of net taxable
income
● Firms with incentives pay between 6% and 13%
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For example, almost all of the 90,000 SMEs pay the regular 30% rate.
Source: DTI and TIMTA
Resulting in huge inequity and “wasted” incentives
2% of 2017 GDP
Fair and accountable tax incentives system
Every peso granted as tax incentive is a peso off the budget that could have been spent for infrastructure, health, education, and
social protection that benefit all, and not only a few.
Package 2
Package 2+
Tobacco and alcohol excise taxes
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UHC annual cost and fund source
76
Tax rates under Congress-approved bill on tobacco tax
Cigarettes for pack of 20
(in pesos per pack) Heated tobacco products for pack of 20 (in pesos per pack)
Tax rates under Congress-approved bill on tobacco tax
Vapor products (in pesos)
78
DOH-DOF and Sen. Pacquiao’s proposal on alcohol tax
Fermented liquors – increase specific tax (in pesos)
DOH-DOF and Sen. Pacquiao’s proposal on alcohol tax
Distilled spirits – increase ad valorem and specific tax (in pesos)
80
DOH-DOF and Sen. Pacquiao’s proposal on alcohol tax
Sparkling wines/champagnes – increase specific tax per liter (in pesos)
DOH-DOF and Sen. Pacquiao’s proposal on alcohol tax
Still wines and carbonated wines – increase specific tax per liter (in pesos)
82
Total revenue estimate (in PHP billion)
Package 3
Property tax and valuation reform
Property valuation reforms
1 Unrealized revenues and socio-economic benefits from
delayed projects
Conflicting land values result in right-of- way compensation problems
2
3 Lengthy court litigations arising 4 5
from valuation disputes Projects are delayed Cost overruns
Effects of outdated land values
84
Sample of huge disparities in valuations
Ayala Avenue, Makati City
✓SMV: Php40,000 per square meter (FY 1994/1996)
✓SZV: Php439,000 (CR) per square meter (2017)
✓MV: Php700,000 per square meter
Legaspi Village, Makati City
✓ SMV: Php29,000 per square meter (FY 1994/1996)
✓SZV: Php320,000 per square meter (2017)
✓MV: Php390,000 per square meter
E. Rodriguez Jr. Ave – C5, Quezon City
✓ SMV: Php35,000 per square meter (FY 2017)*
✓ SZV: Php100,000 (CR) (2012)
Sales Listing gathered in the internet; value estimate on land based on abstraction/extraction method.
- 500,000.00 1,000,000.00
MV SZV
SMV
Ayala Avenue Legaspi Village
E. Rodriguez Ave Jr. – C5
18x
13x
4x
Property valuation reforms
Adopt international standards, rationalize the process
Establish single valuation base for taxation, benchmark for other purposes
Insulate valuation from undue politicization.
Recentralize the neglected function of LGUs; improve oversight by NG Establish comprehensive database
to support valuation function
VALUATION
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Package 4
Passive income tax (PasIT) and
financial intermediary tax (FIT)
Multiplicity of rates: investment driven by tax and not by risk
1. By product (interest income, dividends, capital gains, banks, insurance, DST)
2. By type of lending (private or public / currency bank deposits) 3. By issuer (RBU, FCDU, OBU)
4. By currency (peso vs. foreign) 5. By maturity (short vs. long-term)
6. By taxpayer (individual vs. corporate) 7. By residency (resident vs. non-resident)
8. By business status (engaged vs. not engaged in business) 9. Under special laws (41 special laws)
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Comparison between the current and proposed systems
Special laws
There are 41 laws outside the NIRC on passive income. Tax
reform will repeal 31 of them (hopefully)
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Reform as bridging the future
Source: https://scottdeutschtalks.files.wordpress.com/2016/05/who-wants-change.jpg
134
Reform
coalitions needed to understand the reform
as a package
Thank you
