File photo
MANILA – Tax reform is the Duterte administration’s priority program eyed to boost government revenues for its flagship infrastructure projects, with an annual requirement set at around PHP1 trillion.
But little did economic managers know that this reform bid will be greatly used before the current administration ends its term in 2022, as the fiscal reforms further provided the government leeway to help finance pandemic-related spending.
Economic managers have touted the Corporate Recovery and Tax Incentives for Enterprises (CREATE) law, which was signed into law on May 26, 2020 and took effect last July 1, as the biggest stimulus that will help buoy the domestic economy from the impact of the virus-induced pandemic.
This, as CREATE Act, or Republic Act 11534, reduces corporate income tax (CIT) from 30 percent to 25 percent for big business and to 20 percent for small enterprises, on a gradual basis.
“CREATE not only leaves more cash resources for firms to sustain employment or use for investments, but also positions them to be more regionally competitive and attractive to foreign capital infusion,” Finance Secretary Carlos G. Dominguez III said in his speech during the Financial Executives Institute of the Philippines (FINEX) membership meeting last week.
President Rodrigo R. Duterte, in his first State of the Nation Address (SONA), said his administration aims for “a simpler and more equitable and more efficient tax system than can foster investment and job creation”
On Dec. 19, 2017, he signed into law Republic Act 10963, otherwise known as the Tax Reform for Acceleration and Inclusion (TRAIN) Act.
This law exempted workers with annual income of below PHP250,000 from paying income tax.
With the economy weakening because of the pandemic -- with the 2020 print by -9.5 percent -- economic managers believe that all measures, both monetary and fiscal, put in place since last year will allow the economy to recover this year to between 6-7 percent.
This growth target is the economy’s pre-pandemic level growth levels, as measured by gross domestic product (GDP).
For 2022, the growth target was set between 7 and 9 percent while normalization is seen in 2023 and 2024 with GDP target set between 6 and 7 percent.
Economic managers have repeatedly said that spending, not just for infrastructure projects but also for the vaccination program against the coronavirus disease 2019 (Covid-19), have been ensured until the proposed budget for 2022.
For one, the estimated disbursements for 2021 and 2022 have been retained at PHP4.74 trillion, or about 23.9 percent of GDP, and PHP4.95 trillion, or about 22.4 percent of GDP, respectively.
These spending goals have been set with considerations on ensuring that budget deficit levels remain sustainable.
Budget gap ceiling for this year was set at 9.3 percent of GDP while it is at 7.5 percent of GDP for 2022, 5.9 percent of GDP for 2023, and 4.3 percent of GDP for 2024.
Relatively, revenue target for this year has been set at PHP2.88 trillion while the 2022 figure has been set at PHP3.29 trillion; 2023, PHP3.59 trillion; and 2024, PHP4 trillion.
Last week, Dominguez said they aim to allocate PHP45 billion in next year’s national budget for additional Covid-19 vaccine procurement.
Authorities have repeatedly said that the vaccination program is among the primary measures against the pandemic and that funds are readily available.
Ensuring that all the adult population are vaccinated means lessening the risks of them being critically ill of the virus if ever they get infected, they said.
They also said that ensuring that most of the population get vaccinated would provide the scope for the continued re-opening of the economy. (PNA)
