Legislative leaders beat the gong of optimism last Friday that the $292-billion economy should soon receive another credit upgrade following earnest assurances the multibillion-peso Tax Reform for Acceleration and Inclusion (TRAIN) Program would muster Congress basically intact and on time.
Majority Leader and PDP-Laban Rep. Rodolfo Fariñas of Ilocos Norte said the House of Representatives engaged the various credit-rating agencies in a series of meetings that allowed Standard and Poor’s, Moody’s Investors Service & Fitch Ratings to observe how the tax-reform package actually transited at the lower chamber.
Fariñas said Speaker Pantaleon D. Alvarez even sent House Committee on Appropriations Chairman and National Unity Party Rep. Karlo Nograles of Davao to meet with the credit-rating agencies whose mission heads came away, convinced that the lower chamber will allow the TRAIN program to pass quickly.
“This will increase our chances for a credit upgrade. Under the leadership of Speaker Alvarez, we will pass this because we [Senate and House] have good bicameral relations,” Fariñas said.
For his part, Nograles said the credit-rating agencies believe legislating the tax-reform bill into law will help create the fiscal space necessary for the government to underwrite the various programs seen further accelerating the country’s growth.
“In our meetings with Fitch ratings, Standard & Poor’s and Moody’s rating agencies, they indicated they are monitoring the progress of the tax-reform bill pending in Congress,” he said in a text message to the BusinessMirror.
That program will enable the government to generate net incremental revenues topping P162 billion on its maiden year of implementation alone, even though adjustments to the personal income tax, estate and donor taxes, scaled back value-added tax exemptions and higher excise levy on cars and oil products will initially erode revenue intake.
“In particular, increased revenues for the government will help us spend for more infrastructure projects that will translate to higher economic growth for the nation. Credit-rating agencies take all of this into account when rating the country and will obviously be a big factor in upgrading our credit ratings,” he added.
According to Nograles, his meetings with credit-rating agencies “all happened within the first quarter of this year.”
Earlier, Moody’s Investor Service and Standard & Poor’s both rate the Philippines above the minimum investment grade at “Baa2” and “BBB”, respectively.
Moody’s previously acknowledged the government’s 10-point economic agenda, including the tax-reforms measures, should help boost the sovereign’s credit standing.
Fitch Ratings has proven the only credit- rating agency to assign the Philippines a triple B minus or “BBB-“ classification albeit with a “stable” outlook.
Nacionalista Party Rep. Luis Raymund Villafuerte of Camarines Sur, vice chairman of the House Committee on Appropriations, said the first tax package endorsed by the Department of Finance (DOF) will help the new administration accomplish its primary objective of high and inclusive growth as provided for under President Duterte’s 10-point socioeconomic agenda.
Villafuerte said House Bill (HB) 5636, which consolidated the DOF-backed HB 4774 with 54 other tax-related bills, is designed to cut income-tax rates for the benefit of low-income workers and, at the same time, help raise money for the government’s massive expenditure program to lift 6 million Filipinos out of poverty and transform the Philippines into an upper middle-income country by 2022.
The lawmaker also said HB 5636 would help keep on track Duterte’s vision to eradicate extreme poverty in one generation, or by 2040 and make the Philippines a high-income or advanced economy by that time.
Meanwhile, House Committee on Ways and Means Chairman and PDP-Laban Rep. Dakila E. Carlo Cua of Quirino is expected to sponsor the tax-reform package on Monday (today).
Lawmakers are also expected to submit to the leadership on Monday the proposed amendments to the DOF-backed tax bill.
The tax-reform package seeks to lower personal income-tax rates, expand the value-added tax (VAT) base, adjust excise taxes on petroleum and automobiles, imposing excise tax on sugar-sweetened beverages and ease the rates of estate and donor’s taxes. The leadership of the lower chamber has already expressed confidence that tax package will be passed before its adjournment sine die on May 31. The bill has provisions on e-receipts issuance and transmission, fuel marking, point-of-sale machines linkage to the BIR and linkage between BIR government agencies/bureaus/offices.
It also has provisions for a 20-percent final income tax on Philippine Charity Sweepstakes Office, as well as on lotto winnings.
Under the measure, not more than 40 percent of the incremental revenue generated from the petroleum-excise tax was earmarked for social benefit programs and the granting of fuel vouchers to qualified transport franchise holders. For the same period, the remaining incremental revenue was set aside for infrastructure, health, education and social-protection expenditures.
Likewise, 85 percent of excise-tax revenue from sugar-sweetened beverages was allocated for priority programs and the balance were to fund the welfare and benefits of sugar planters/farmers. The revenue loss to lower personal income tax may reach P140.1 billion, while the revenue gain is expected at P187.7 billion for full-year implementation.