PRESIDENT Rodrigo R. Duterte will remain “very engaged” with Congress in pushing for the approval of the remaining tax reform packages using his “political capital” as his administration targets an “A”-level sovereign credit rating within two years, Finance Secretary Carlos G. Dominguez III said Wednesday.
Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa C. Guinigundo also announced that the Department of Finance (DoF) and the BSP “will organize” an inter-agency committee that will be tasked to formulate a road map, which articulates and systematizes the country’s “active pursuit” of an “A” level credit rating.
The road map, he also said, should be “finalized by next week.”
S&P Global Ratings last week upgraded the country’s credit rating to “BBB+” from “BBB” — the country’s highest debt rating so far that is a step shy of “A.” S&P Director for Sovereign and Internal Public Finance Ratings Andrew Wood has said that the credit rater is currently watching for progress in the remaining tax reform legislation.
Investment-grade sovereign debt begins at BBB-.
Senate President Vicente C. Sotto III has said that only the package slashing corporate income tax rate has a good chance of making it out of Congress within the next two years.
Apart from the bill reducing the corporate income tax rate, other tax packages pending in the Senate ways and means committee are bills proposing to simplify the tax structure of the financial sector, centralize real property valuation and assessment, increase the government’s share from the mining revenues and excise taxes imposed on alcohol and tobacco products.
At a briefing at the Palace on Wednesday, Mr. Dominguez said when asked about the President’s role: “The President has always been intervening here. He’s not disengaged. He is very engaged in this tax reform program. In fact, as I mentioned, without his investing his political capital, we would not have been able to pass this [first tax reform package]. And he has assured us that he will continue to support this tax reform program.”
It took more than a year and intervention by Mr. Duterte to persuade legislators to pass the first tax reform package, which cut personal income tax rates, removed a number of value-added tax exemptions, and raised or added taxes on several goods and services. It was signed into law in December 2017 and went into force at the start of the next year. The President signed in February 2019 the Tax Amnesty Act, which was watered down when Congress removed a provision that would have allowed tax authorities to check bank accounts of applicants to verify their asset declarations.
For his part, Mr. Guinigundo said: “We are…embarking on an agenda called the road to ‘A.’”
“The idea is for the Department of Finance and the BSP to organize an inter-agency committee that would formalize a road map to articulate and systematize the Philippines’ active pursuit of an A-level rating. Such a road map will evidence the buy-in and the commitment of key economic and infrastructure officials and agencies to get our efforts properly credited to ‘A’ before 2022 to help further bring about more benefits to the economy and to our people,” he said.
“We shall direct our efforts in addressing the issues that were raised by S&P, by Fitch, by Moody’s and other credit rating agencies like JCRA of Japan such as further increasing our per-capita income, enhancing our potential output, strengthening our external payments buffers, keeping prices stable, fortifying public finance and elevating governance standards. These are the plots to an interesting story.” — Arjay L. Balinbin