The Duterte administration remains fully committed to reduce poverty incidence to just 14 percent or lower by 2022, given the game-changing reforms it has been carrying out to make the country`s economic expansion not only rapid but also inclusive for all law-abiding Filipinos, Finance Secretary Carlos Dominguez III has said.
Dominguez said these reforms include the implementation of the Rice Tariffication Law (RTL), which has stabilized the price and supply of rice in the retail market; the Tax Reform Acceleration and Inclusion Act (TRAIN), which gave substantial tax breaks to 99 percent of wage earners; and the increased tax rates on ‘sin’ products to help fund the Universal Health Care Program (UHC) that primarily benefits low-income families.
He said these reforms, complemented by other initiatives along with positive economic developments that boosted the purchasing power of Filipinos, has reduced the country’ poverty incidence from 23.3 percent in 2015 to just 16.6 percent in 2018.
This means 5.9 million Filipinos lifted themselves from poverty in the first three years of the Duterte presidency, he said.
“We stand by our commitment to reduce poverty incidence to 14 percent or lower by 2022,” Dominguez said at the joint general assembly of financial institutions held at the Shangri-La Hotel in Makati City last week.
These institutions include the member-groups of the ACI Philippines-Financial Markets Association (ACI Phils.), Fund Managers Association of the Philippines (FMAP), Investment House Association of the Philippines (IHAP), Money Market Association of the Philippines (MART), and the Trust Officers Association of the Philippines (TOAP).
Dominguez pointed to official statistics showing that the lower-income brackets experienced the highest increase in mean per-capita income from 2015 to 2018.
For the lowest 30 percent of the population, per-capita income grew by an average of 32 percent, outpacing the 20.9 percent overall average, he said. In comparison, the richest 20 percent of the population grew their per-capita income by only 18 percent during this period, he added.
“Clearly, the growth we are experiencing is not only rapid. It is also inclusive,” Dominguez said.
Dominguez enumerated the following positive developments that have kept the economy on its high--and inclusive--growth path:
· The lower debt load of 41.5 percent of gross domestic product (GDP) in 2019 from 44.7 percent in 2015, which was attained through fiscal discipline;
· Remarkable improvement in revenue collections even with the enactment of the remaining tax reform packages still pending in the Congress. Comparing revenues in 2019 versus those of 2015, collections improved by 54 percent, which enabled the government to fund President Duterte’s signature “Build, Build, Build” program;
· Spending on infrastructure dramatically grew by 42 percent last year compared to 2015. “Clearly, improved revenue flows translate into greater economic investments,” Dominguez said;
· A much-improved tax effort of 15.1 percent of GDP last year, or the strongest performance in 22 years and higher compared to 13.6 percent in 2015;
· Dividend collections from government-owned and controlled corporations (GOCCs) reached a record P69 billion last year;
· A sustained campaign to crack down on errant Philippine Offshore Gaming Operators (POGOs) and their service providers that evade proper taxation, which led to the collection of P 6.42 billion in taxes from this sector in 2019—a 169 percent increase from the preceding year;
· The speedy implementation of digital transformation programs in revenue agencies to provide convenient, reliable, and transparent services to the taxpayers;
· Nationwide implementation of the Fuel Marking Program, which is a first in the country. The program is expected to curb smuggling and misdeclaration of petroleum products and dramatically increase revenue collections;
· The full switch to an electronic invoicing system by 2022 to do away with some of the redundancies and inefficiencies in the present tax system;
· The Philippines’ credit rating upgrade to "BBB+" by Standard and Poor’s (S&P) and by the Rating and Investment Information Inc. (R&I). Fitch Ratings also revised its outlook on the country’s BBB credit rating from “stable” to “positive,” signaling a potential upgrade of the score within the next few months.
“The upgrades create even better conditions for businesses in the country. These developments signal approval of the fiscal discipline that has characterized the policies of the Duterte administration. We are aiming to achieve an `A` rating before the end of President Duterte’s term in 2022,” Dominguez said.
He pointed out that higher credit ratings benefit not only the government and private investors but ordinary Filipinos as well, because banks would eventually be able to lend money to them at lower interest rates.
“This will translate into larger investments, as well as more jobs and a better quality of life for Filipino families,” Dominguez said.
He said TRAIN not only boosted consumer demand, but also broadened the tax base and improved tax compliance.
Meanwhile, revenues from ‘sin’ taxes were almost double in 2019 from what they were in 2015, he said.
He said this was the result of excise tax increases on tobacco products, whose tax rates were raised twice under this administration--the first time such taxes were adjusted in one administration--as well as on alcohol, e-cigarettes, and sweetened beverages.
Dominguez said that this year, the government expects ‘sin’ tax collections to increase by at least 130 percent over the 2015 collections.
Another reform measure that benefited low-income households is the implementation of the RTL, which produced a P9-per-kilo reduction in rice prices compared to the peak market rates in late 2018.
Dominguez said low rice prices benefit low-income households the most as they spend a fifth of their budgets on rice alone.
Liberalized rice imports as a result of RTL also give consumers a wide choice of rice varieties—from the most affordable to the more expensive premium ones, he said.
This downward price trend is likewise beneficial to the corporate sector as the much lower inflation rate eased the pressure on businesses to further raise wages, he added.