Finance Secretary Benjamin Diokno commended legislators for passing game-changing structural reforms during the 18th Congress, enabling the country to withstand the harsh effects of the pandemic and chart a clear path to recovery and rapid expansion.
“The tax reform laws you have enacted have leapfrogged the Philippines into the company of the world’s fastest-growing economies. When the pandemic struck and stalled our economic growth, these laws were a critical factor in maintaining fiscal sustainability,” said Secretary Diokno in two consecutive organizational briefings before the respective Committees on Ways and Means of the Senate and the House of Representatives.
Secretary Diokno cited how Republic Act (RA) 10963, otherwise known as the Tax Reform for Acceleration and Inclusion (TRAIN) Law, corrected the longstanding inequity of the income tax system.
“It lowered the personal income tax rates of individuals, simplified the estate and donor’s taxes, expanded the value-added tax base, adjusted the oil excise taxes, and introduced excise tax on sweetened beverages,” said Secretary Diokno.
Since 2018, TRAIN has raised P476.1 billion in additional revenues intended for funding the government’s infrastructure, social, and healthcare programs.
Meanwhile, RA 11213 or the Tax Amnesty Act allowed errant taxpayers to affordably settle their outstanding tax liabilities on estate and delinquencies, while providing the government with more revenues for priority programs. From 2019 to 2021, total additional collections from this measure reached P14.6 billion.
The increased excise taxes on sin products also raised a total of P85 billion in incremental revenues from 2020 to 2021.
“The increased excise taxes on sin products such as alcohol and tobacco was aimed to discourage the consumption of these unhealthy goods while ensuring funding for the Universal Health Care program,” Secretary Diokno explained.
Total tax intake from all the enacted tax reform measures amounted to P575.7 billion from 2018 to 2021.
Meanwhile, RA 11534 or the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, which was passed last year, is considered as the most significant fiscal stimulus for businesses in the country’s recent history.
“It provided an immediate corporate income tax rate cut of 10 percentage points for domestic micro, small, and medium enterprises and 5 percentage points for all other corporations. In addition, it promoted a tax incentive system that is performance-based, time-bound, targeted, and transparent,” said Secretary Diokno.
Secretary Diokno added that the tax incentives system under CREATE balances the interests of all stakeholders while remaining faithful to the fundamental principles and mindful of the country’s fiscal challenges.
With CREATE, investor confidence has continuously improved, with the country’s foreign direct investment (FDI) inflows reaching a record-high of USD10.5 billion in 2021. For the first five months of 2022, FDI inflows also increased by 19% to USD4.2 billion from the previous year’s level.
The Department of Finance (DOF) plans to further improve the tax system and push the enactment of the remaining tax reform packages of the Duterte administration.
Among the Marcos administration’s key fiscal priorities are the Real Property Valuation and Assessment Reform Bill, Passive Income and Financial Intermediary Taxation Act, imposition of VAT on digital goods and services, excise tax on single-use plastic bags, and the rationalization of the mining fiscal regime.
