Vision for the Philippines
socioeconomic agenda is advancing strongly.
1. Macroeconomic policies
Constraints to doing business have shifted from macro to micro issues…
World Bank 2005 World Economic Forum 2017-18
Strong macroeconomic fundamentals underpin solid growth.
1. Macroeconomic policies
1. Macroeconomic policies
BB- BB BB+
BBB- BBB BBB+
0 0 0 0 0 0 0 0
Philippine credit rating
Investment grade
Credit rating upgrade means upgrading everyone’s life.
2. Tax reform
Tax reform is about INVESTING
in our country’s FUTURE.
Impact on Taxpayer’s
Personal Income
Higher tax revenues funding social services and infrastructure
Lower debt has led to reduced interest payments
2. Tax reform
…Creating more fiscal space for more productive spending.
2. Tax reform
2. Tax reform
3. Ease of doing business
3. Ease of doing business
4. Infrastructure spending
photos from DOF, DOTr, BCDA
4. Infrastructure spending
4. Infrastructure spending
5. Rural development
photos from IRRI
Farmers benefit from the Rice Competitive
Enhancement Fund (RCEF)
with a 10 billion peso annual appropriation for the next six years, plus any additional
amount from rice tariff exceeding PHP 10 billion.
Rice Competitive Enhancement Fund (RCEF)
Photo: IRRI
Photo: IRRI Photo: IRRI
5. Rural development
7. Human capital development
7. Human capital development
These are some of the specific benefits that
9. Social protection programs
Results after the first three years
GDP growth has remained robust
despite headwinds in the global economy.
become an upper-middle income country in 2020.
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: PSA
Note: Poverty rates for 2021 to 2022 represent government targets.
Rice liberalization is…
pro-consumer pro-farmer
pro-taxpayer pro-workers pro-children pro-poor
Photo: IRRI
Rice liberalization reform is a game-changer .
achieving entirely the 10-point socioeconomic agenda.
Development objectives in next three years.
• The overarching objectives for the next three years are to:
1. Accelerate implementation of the Build Build Build infrastructure program.
• We have achieved 5.1 percent of GDP spending on infrastructure and we are on track to achieve 7 percent of GDP by 2022. This is consistent with achieving an 8 percent GDP growth.
● Consider hybrid PPPs
● Improve pre-planning
● Involve LGUs in identification and strategic planning of projects
● Upgrade technical capacity of LGUs to deliver local infrastructure
● Introduce land valuation reform to resolve right- of-way conflicts
● Introduce 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 and e-cigarette excise
Package 4
Passive income
and financial taxes
Some economic priorities in next three years
3. Pursue economic reforms to increase FDI and jobs. Priority bills include
• Public Service Act amendment
• Retail Trade Liberalization Act amendment
• Foreign Investment Act amendment
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
5. Improve the productivity of agriculture, including distribution of
individual titles to land reform beneficiaries.
Tax reform is about INVESTING
in our country’s FUTURE.
Why tax policy reform is needed: A bad tax system
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
Others
1. Motor Vehicle Users Tax
2. General amnesty with lifting of bank secrecy for fraud cases and automatic exchange of information.
Duterte Administration’s
Comprehensive Tax Reform Program
Package 1
Package 1A: TRAIN Personal income tax, consumption tax, and transaction taxes (RA 10963)
Package 1B: Tax amnesty Estate and delinquency tax amnesty (RA 11213)
Package 2
Corporate income tax and fiscal incentives
Package 2+
A. Tobacco excise (RA 11346) B. Alcohol and e-cigarette
Package 3
Property valuation reform
Package 4
Passive income
and financial tax
Package 2
Corporate income tax
and incentives reform
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
efficiency.
Lower corporate income tax
We have a complex tax incentives system.
We grant the most
generous fiscal incentives since they are in lieu of all taxes and given forever.
• 13 IPAs
• 133 investment laws and 209 non-investment laws, total of 342 special laws
• 549 ecozones and
freeports
In 2017, over PHP 441 billion was granted to 3,150 firms
Resulting in many and unnecessary incentives
(2.8% of 2017 GDP)
● Firms with no incentives pay the regular rate of 30% of net taxable income
● Firms with incentives pay between 6% and 13% effective tax
● For example, almost all of the 90,000 SMEs pay the regular 30% rate.
In 2017, 989,166 registered firms
In addition, PHP 63 billion was lost due to possible abuse of transfer pricing
(0.4% of 2017 GDP)
Total: PHP 504 billion
(3.2% of 2017 GDP)
Package 2
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+
Alcohol and tobacco excise taxes
1. Ensure financial sustainability for health expenditure programs
2. Discourage excessive alcohol, tobacco, e-
cigarettes, and sweetened beverages consumption for better health and
social outcomes, especially
3. Ensure a healthy, world
class workforce
Funding gap before the enactment of Republic Act (RA) 11346
Funding gap before the enactment of
the increase in tobacco taxes (RA 11346)
enactment of the RA 11346
Funding gap after the enactment of
the increase in tobacco taxes (RA 11346)
Excise tax rates of cigarettes for pack of 20 (PHP per pack) under RA 11346
Excise tax rates of heated tobacco products for pack of 20 (PHP per pack)
Increase to 45 pesos per pack in 2020, and further increase by 5 pesos per pack per year like regular cigarettes.
a. RA 11346 b. DOH-DOF proposal and
HB 1026 as amended
10 10.5
2020 2021
onwards
5 percent indexation every
year thereafter
(10.5 in 2021)
Excise tax rates of vapor products (PHP)
10
45 50 55 60 63
0 10 20 30 40 50 60 70
RA 11346 2020 2021 2022 2023 2024
PHP
DOH-DOF
RA 11346 2020 2021 2022 2023 2024
10 4.5 5.0 5.5 6.0 6.3
30 35 40 45 47
0 10 20 30 40 50 60 70
RA 11346 2020 2021 2022 2023 2024
PHP
HB 1026 as amended
Freebase Nicotine or salt nic
DOH-DOF 2020 2021 2022 2023 2024 Total
HTPs 0.1 0.1 0.2 0.2 0.2 0.8
Vapor products 3.1 3.4 3.8 4.1 4.3 18.7
Total 3.2 3.6 3.9 4.3 4.5 19.5
Estimated incremental revenue* (PHP billions)
HB 1026 as amended 2020 2021 2022 2023 2024 Total
HTPs 0.1 0.1 0.2 0.2 0.2 0.8
Vapor Products 1.1 1.3 1.5 1.7 1.8 7.4
Total 1.2 1.4 1.7 1.9 2.0 8.2
fermented liquors (e.g., beer) and alcopops
25
40
45
50
55
61
0 10 20 30 40 50 60 70
2019 2020 2021 2022 2023 2024
PHP
DOH-DOF HB 1026 as amended
25
32 34 36 39 41
0 10 20 30 40 50 60 70
2019 2020 2021 2022 2023 2024
Per ce n t
distilled spirits (e.g., brandy, rum, whiskey, and gin)
23
40
45
50 55
61
0 10 20 30 40 50 60 70
PHP
DOH-DOF
23
35
40
45 48
52
0 10 20 30 40 50 60 70
PHP
HB 1026 as amended
Ad valorem excise tax rates (NRP per proof) on distilled spirits (e.g., brandy, rum, whiskey, and gin)
DOH-DOF HB 1026 as amended
20
25 25 25 25 25
0 5 10 15 20 25 30
2019 2020 2021 2022 2023 2024
Per ce n t
20
22 22 22 22 22
0 5 10 15 20 25 30
2019 2020 2021 2022 2023 2024
Per ce n t
DOH-DOF 2020 2021 2022 2023 2024 Total
RA 11346 15.5 22.6 26.6 32.6 31.6 128.9
Alcohol 33.3 41.8 49.9 57.7 66.3 249.0
E-cigarettes* 3.2 3.6 3.9 4.3 4.5 19.5
Total 52.0 67.9 80.4 94.7 102.4 397.4
and HB 1026 as amended (PHP billions)
HB 1026 as amended 2020 2021 2022 2023 2024 Total
RA 11346 15.5 22.6 26.6 32.6 31.6 128.9
Alcohol 16.6 19.9 23.1 26.2 29.7 115.5
E-cigarettes* 1.2 1.4 1.7 1.9 2.0 8.2
Total 33.3 44.0 51.3 60.8 63.3 252.6
Package 3
Property 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
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)
✓ MV: Php130,000 per square meter
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
Package 4
Passive income tax and
financial intermediary tax (PIFITA)
As of 8/5/2019 5:10 PM
Multiplicity of rates
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 (42 special laws)
Comparison between the
current and proposed systems
Type of income/financial intermediaries/transactions
Number of
unique rates/bases (current)
TOTAL 80
A. Tax on passive income 52
1. Interest 22
2. Dividends 13
3. Capital gains/transfers 17
B. Tax on financial intermediaries 8
1. Banks and non-banks subject to GRT 5
2. FIs subject to premium tax 1
3. Other FIs subject to VAT 2
C. DST on financial transactions 20
Number of
unique rates/bases (proposed)
40
23
9
9
5
5
2
1
2
12
Reform as bridging the future
coalitions needed to understand the reform
as a package
Thank you
