More taxes needed for gov’t reforms

Font Size

Asian Development Bank (ADB)
The Asian Development Bank will hold its 51st annual meeting in Manila from Thursday to Saturday. -- SANTIAGO JOSE J. ARNAIZ

By Melissa Luz T. Lopez
Senior Reporter

THE PHILIPPINES needs to collect more taxes to address the “urgent task” of traffic congestion and efficient public transport, the Asian Development Bank (ADB) chief said as he threw support for upcoming revenue reform measures.

Investor optimism has significantly improved as far as the Philippine economy is concerned, although infrastructure gaps remain a major issue especially in urban areas amid robust domestic activity, ADB President Takehiko Nakao said.

ADB Manila 2018 logo

“The perception of investors outside the Philippines as well as in the Philippines is now becoming better. I think this administration under President Duterte has been providing the impression that they will do something,” Mr. Nakao said in an April 11 interview with BusinessWorld.

“I think the Philippine economy is picking up and there’s some more expectations, and for ADB, it’s nice to see those developments in the Philippines. But of course for Manila transport and some rural poverty, there are many things to do.”

“Infrastructure transport in urban areas like Manila and Davao are urgent tasks,” Mr. Nakao said, as he acknowledged the Duterte government’s P8-trillion “Build, Build, Build,” program.

Central to realizing these ambitious infrastructure spending goals is tax reform, which will fund a huge chunk of big-ticket projects in the pipeline, the ADB president said.

The first tranche of the government’s comprehensive tax reform program has kicked in Jan. 1, from which the state intends to raise around P82.3 billion in additional revenues.

Together with up to four more tax packages expected to be passed into law, the share of revenues is expected to rise to 17.5% of gross domestic product by 2022, coming from a 16.3% share this year.

The Tax Reform for Acceleration and Inclusion (TRAIN) law reduced personal income tax rates for those earning P2 million annually. Revenue losses — pegged at roughly P10 billion a month — is expected to be offset by the removal of some value-added tax breaks; higher fuel, automobile, mineral and coal excise tax rates, as well as new levies on sugar-sweetened drinks and cosmetic surgery.

TRAIN has been pointed as the culprit for a surge in commodity prices in recent months. However, the reality is that the state needs to raise even more revenues for a deeper funding base, Mr. Nakao noted.

“People talk about the negative impact on economic activities and inflation by raising tax, but this country needs more tax revenues to do more things,” Mr. Nakao said. “To do more public service including the infrastructure investments, I think efforts to raise more revenues and those which rationalize the too-complicated [tax] system is important.”

“We are now starting to have a concrete plan of many things. Some of them have already been started building, but some of them we are still in designing stage like subways,” Mr. Nakao added, pointing out that “collective and decisive” actions from the central government are needed to ensure that plans go beyond the drawing board.

The ADB holds its 51st annual meeting from Thursday to Saturday as they engage government leaders and experts on discussions on embracing digitization and addressing infrastructure gaps to address pockets of poverty across Asia.