Admin Must ‘Work Doubly Hard’ on Accelerated Poverty Reduction, Says Dominguez

Finance Secretary Carlos Dominguez III has welcomed the decline in poverty incidence to 21.6 percent, saying this is the cue for the government to “work doubly hard” on its 10-point socioeconomic agenda to hit President Duterte’s target of reducing the number of poor Filipinos by 1.5 percent of the population annually over the next six years.

Dominguez said that slashing the poverty rate from almost 22 percent to just 13 percent by 2022 remains “doable,” but it will require “the Duterte administration to work doubly hard on fleshing out programs of the 10-point socioeconomic agenda that would boost growth and generate enough jobs and livelihood opportunities nationwide as a way to raise incomes for the poor to meet their food and non-food needs. At the same time, food prices need to be managed so that it does not eat up income growth.”

“President Duterte’s poverty-reduction target remains doable, but it will entail pursuing with greater vigor the accelerated spending on labor-intensive infrastructure to boost growth as well as on human capital formation like education and health, so poor Filipinos can have better access to quality jobs and livelihood opportunities,” he said.

“A drastic reduction in the country’s poverty incidence as envisioned by the President has become more challenging, as this will require improving the living standards of the poorest-of-the-poor families instead of just uplifting the lives of those on the fringes of the poverty line,” said Dominguez in reaction to the latest Family Income and Expenditure Survey (FIES) released last week by the Philippine Statistics Authority (PSA) pointing to the decline in the poverty rate from 26.3 percent in 2009 to last year’s 21.6 percent.

“The government’s focus should be on the countryside as the severely poor are mostly in rural areas,” said Dominguez, who once served as agriculture secretary.

“This also means that we have to pursue tax reforms in the Congress without letup,” he said, “so the Duterte administration can generate enough revenues to bankroll both the pro-poor and business-friendly programs of the 10-point socioeconomic agenda on inclusive growth.”

Dominguez said the DOF will study the 2015 FIES of the PSA to see if it needs to finetune the figures in its Comprehensive Tax Reform Program, the first package of which was already submitted to both legislative chambers last September.

The past government has managed to improve the lives of the marginal poor by way of projects like the Pantawid ng Pamilyang Pilipino Program (4Ps), a conditional cash transfer (CCT) initiative in which poor families are given cash in exchange for meeting certain conditions like sending their kids to school and getting medical check-ups at barangay health centers.

Dominguez said the government must shift to overdrive its higher spending on infrastructure, human capital and social protection, especially in the regions where the poverty and unemployment levels are at their peaks as shown in the FIES survey.

The government also needs to frontload initiatives such as reforming the National Food Authority (NFA) with an eye on bringing down rice prices without a corresponding drop in the income of farmers by pursuing rural modernization to raise farmers’ productivity and incomes; and streamlining business rules to level the playing field for, and incentivize, micro, small and medium-size enterprises (MSMEs) that are a wellspring of livelihood opportunities in the communities and barangays.

Finance Undersecretary Karl Kendrick Chua said one conclusion by the FIES in its 2015 survey that the 4Ps program has apparently gained traction gives the Department of Finance (DOF) all the more reason to pursue tax-and-transfer measures that directly target and benefit the poorest families, in lieu of blind subsidies and exemptions from the Value Added Tax (VAT) and other taxes that are vulnerable to multibillion-peso leakages and benefit more the affluent families and big corporations.

As part of Package One of its comprehensive tax plan, the DOF has proposed to Congress the reduction in personal income taxes that will benefit wage earners and other low-income workers the most, but seeks to offset the projected revenue loss by adjusting excise taxes on petroleum products and automobiles, as well as broadening the VAT base by lifting certain exemptions.

“However, the DOF tax plan provides for highly targeted transfers plus expanded health services to cushion the impact of the proposed adjustment in tax rates on the poorest families as well as on other vulnerable sectors like indigent senior citizens and persons with disabilities (PWDs),” said Chua, who is also the DOF’s chief economist.

“What the previous government did was mainly to uplift those closer to poverty line,” said Chua, adding that the DOF will go over the FIES’ latest household survey data and poverty statistics “to assess its impact on the DOF’s tax and welfare estimates.”

Chua echoed Dominguez’s view that reducing the poverty incidence from 22 percent to 13 percent is “doable but more challenging as it is easier to uplift those near the poverty line, which the previous government did than those who are severely poor, which is the task of the Duterte government.”

“This is why we must accelerate tax reforms to equitably raise money to invest in the poorest families by providing them with better education and health services, and in rural infrastructure like more targeted farm to market road and irrigation,” he said.

Expounding on Dominguez’s other poverty-reduction proposals, Chua said “we need to accelerate NFA reform to help bring down retail rice price without farm incomes necessarily falling, as well as simplifying business regulations, enhancing competition to level the playing field, and securing property rights. All these can help micro, small and medium enterprises create more and better jobs to help accelerate poverty reduction.”

“With the 2015 Family Income and Expenditure Survey now available, we will need to recompute all the revenue, economic, equity, and price effects,” he said. (DOF)