Dominguez cites rise in spending power due to TRAIN

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Carlos G. Dominguez III
Finance Secretary Carlos G. Dominguez

By Karl Angelo N. Vidal, Reporter

INCREASED profitability of premier companies in the country best illustrates the “success” of the implementation of the first tax reform package, the Department of Finance said in a statement on Friday.

The statement quoted Finance Secretary Carlos G. Dominguez III before the Philippine Economic Briefing (PEB) in Osaka, Japan, as saying that significant growths in sales and income of corporate giants in the country indicate that Filipinos have started to benefit from the reduction of personal income tax rates in the Tax Reform for Acceleration and Inclusion (TRAIN) Law.

“The TRAIN Law put more money in the pockets of the consumers and ensured strong domestic demand in the economy,” Mr. Dominguez told Japanese businessmen at the briefing late last month.

Mr. Dominguez cited positive profit reports from Jollibee Foods Corp., Ayala Land, Inc. as well as SM Prime Holdings.

The statement said Jollibee reported a 16% increase in sales at about $2.9 billion in 2018, bringing its net income to $158 million, up 17%.

Ayala Land posted sales of about $3.11 billion, up 18% year-on-year, translating to a 16% increase in bottom line to $558 million.

SM Prime Holdings tallied sales of almost $2 billion in 2018 and net profit of $616 million, both up by 17%.

“The Philippines’ leading commercial banks also posted strong interest income growth on the back of strong customer loan growth in the first nine months of 2018,” the Finance Secretary said.

“Ninety-nine percent of individual taxpayers enjoy reductions in their personal income tax (PIT) rates. Filipinos earning below US$4,500 annually are now exempted from paying personal income taxes while workers earning above it now receive about a month’s extra take-home pay each year from the deductions in their tax rates.”

Implemented last year, the TRAIN Law provided tax cuts and exemptions on personal income, as workers with an annual salary of P250,000 and below were exempted from paying their dues. On the other hand, heftier taxes were imposed on certain goods such as fuel, tobacco and sweetened beverages.

The DOF said the first package of the Duterte administration’s comprehensive tax reform program provided “99%” of the country’s workers P103 billion in extra income in the first nine months of 2018, averaging P12 a month.

Mr. Dominguez also introduced to Japanese businessmen the second package of the tax reform program, which seeks to reduce corporate income tax rates and rationalize fiscal incentives.

“We will gradually reduce the corporate income tax rates from 30 percent to 20 percent to bring us closer to the regional average. Having a corporate income tax rate higher than those of our neighboring economies at 30 percent is a barrier to investments,” he said.

Mr. Dominguez said the gradual reduction of corporate tax rates is important to draw more foreign direct investments (FDI) flowing into the region.

The central bank reported on Feb. 12 FDI posting a net inflow of $9.061 billion in the 11 months to November, down 3.2% from a year earlier.

Economic managers and other state officials went to Osaka for the seventh meeting of the Philippines-Japan High-Level Joint Committee on Infrastructure Development and Economic Cooperation, which was held last Feb.21.

Also included in the itinerary was the third PEB session, wherein the government discussed infrastructure cooperation, socio-economic issues and the peace process in Mindanao.