By Chino S. Leyco, January 2, 2020; Manila Bulletin
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The Department of Finance (DOF) urged the Congress to pass the remaining packages under the comprehensive tax reform program (CTRP) as well as other pending economic reforms to ensure the country’s “A” sovereign credit rating status.
Finance Secretary Carlos G. Dominguez III said the prompt approval of the three pending CTRP packages plus the amendments to the Public Services Act (PSA), Retail Trade Act (RTA) and the Foreign Investments Act (FIA) will secure the country’s “A” credit rating in two years’ time.
Dominguez explained that securing an “A” rating is crucial for the government to offset the impact of the preferential interest rates that the Philippines will lose once the nation ascends to upper middle-income country status this year.
Earlier, the Duterte administration’s economic managers laid-down their “Road to A” initiative aimed at ensuring the country would attain the coveted “A” rating, a sovereign status accorded only to the world’s most stable economies.
Dominguez said the government is stepping up the implementation of its reforms this year while keeping a low debt-to-gross domestic product (GDP) ratio.
“We’ve to take certain action to do this. Among them is our tax reform program. In order to increase our tax revenue as a percentage of GDP, that’s very important. Also to make sure that our GDP is growing faster than our loans so that we don’t reach a 42 percent debt-to-GDP ratio,” he said.
Dominguez said the DOF, Bureau of the Treasury, the National Economic and Development Authority (NEDA) and the Bangko Sentral ng Pilipinas (BSP) are spearheading the efforts to secure an “A” rating.
“We mean to address the need for us to improve our credit rating because we’re going to lose our special interest rates, because we will be graduating already to UMIC status soon. We have to make sure the differentials in the interest rates will be reduced with the credit upgrade,” he said.
Currently, there are three remaining tax reform packages under the CTRP that need to be approved by Congress to encourage more investments and better tax compliance.
Among the pending measures is Package 2 or the Corporate Income Tax and Incentives Rationalization Act (CITIRA) that aims to gradually reduce corporate income tax rate in the country — currently the highest in Southeast Asia — from 30 percent to 20 percent.
The second part of CTRP also wants to modernize the Philippine tax incentive system to help small and medium enterprises grow, make the local business environment competitive, and ensure an inclusive economic progress.
Another bill under CRTR is Package 3 or the Real Property Valuation Reform bill that once passed into law, will promote the use of uniform real property valuation standards and help resolve right-of-way acquisition issues that stalled several infrastructure projects of the government.
The final proposal under CTRP is Package 4 covering the Passive Income and Financial Intermediary Taxation Act.