Dominguez ‘very confident’ 18th Congress will approve more tax reform bills

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Metro Manila (CNN Philippines, July 1) — The remaining tax reform measures pushed by the Department of Finance (DOF) will have better chances of approval in Congress since voters have affirmed lawmakers in the last election even if they backed the initial tax reform law, a Cabinet official said Monday.

“The confidence level is very high,” Secretary Carlos Dominguez III said during the forum of the Economic Development Cluster ahead of President Rodrigo Duterte’s fourth State of the Nation Address this month.

“I am very confident that given the lessons in this last election — where no one who supported the tax reform lost — will resonate in the minds of the legislators,” he added.

The head of Duterte’s economic team is a lot more optimistic about the chances of the remaining tranches of the tax reform program, with lawmakers no longer spooked about potential public backlash from these controversial measures.

“In this election, all those who supported the tax reform won. I know Senator (Sonny) Angara was head of the (Senate) Ways and Means (committee) and I know he was very concerned about that, and yet he [won],” Dominguez said.

“I think the message of the electorate here is if the tax reform is fair, the money is not stolen and is used for their benefit in infrastructure and education, they (legislators) will win,” he added.

READ: Second tranche of tax reform fails to pass Congress

Prior to the Tax Reform for Acceleration and Inclusion (TRAIN) law, Dominguez recalled that the Arroyo administration was the last to enact tax reform by raising the value-added tax rate from 10 percent to 12 percent. That law had cost bill author Sen. Ralph Recto a fresh term as he lost during the 2007 elections.

At least four more tax reform packages proposed by the DOF will negin from scratch in the 18th Congress. This includes the controversial Tax Reform for Attracting Better and High-Quality Opportunities (TRABAHO) bill that will slash corporate income tax rates but will cut short various tax breaks given to foreign investors. For Dominguez, TRABAHO “will encourage even more competitive investments” but ecozone locators said changing the rules on fiscal perks would likely chase investors away.

TRAIN collections totaled ₱68.4 billion in 2018, settling eight percent above target on its first year of implementation. The law imposes additional taxes on fuel, sugary drinks, coal, cars, tobacco, and cosmetic surgeries while lowering the personal income tax duties.

“The landslide vote delivered in favor of candidates endorsed by the President translates into approval of the reforms the President has launched from the start of his administration,” the Finance chief added, noting the Duterte government’s “great political resolve” to pursue fiscal reforms.

The additional tax collections, together with at least ₱15 billion in annual collections from higher taxes on cigarettes as well as vapes, are also expected to fund the universal healthcare program, which will broaden the coverage if medical insurance benefits for Filipinos.

Dominguez estimates the project will require ₱1.4 trillion over the next five years, with only ₱1 trillion covered by current funds.

“We hope to raise the remaining balance from tobacco taxes, and with the subsequent enactment of higher excise taxes on alcohol,” he added, the latter one of many bills abandoned by the previous Congress.

The Duterte administration intends to invest heavily on infrastructure until 2022, which they also expect to boost economic growth to above six percent yearly.