DOF Proposes Tax Reform to Reduce Poverty Rate

The Department of Finance (DOF) has submitted the first package of its Comprehensive Tax Reform Program to both legislative chambers last September according to its recent release.

“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 Value Added Tax (VAT) base by lifting certain exemptions.” DOF stated.

Finance Undersecretary Karl Kendrick Chua stated that 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).’

According to Chua, who is also the chief economist of DOF, the previous government has uplifted those closer to poverty line by projects like the Pantawid Pamilyang Pilipino Program (4Ps), a conditional cash transfer (CCT) initiative.

Chua added that the Department will ‘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.’

DOF will also study the 2015 Family Income and Expenditure Survey (FIES) ‘to assess its impact on the Department’s tax and welfare estimates.’

“With the 2015 Family Income and Expenditure Survey now available, we will need to recompute all the revenue, economic, equity, and price effects,” Chua stated.

Furthermore, Chua emphasized the task of Duterte government to uplift the severely poor by reducing the poverty incidence from 22% to 13% by 2022.

“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,” Chua stated.

“We need to accelerate National Food Authority (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.” Chua added. (DOF/RJB/MAPA/PIA-NCR)