Finance Secretary Carlos Dominguez III reiterated the Philippines’ commitment to continue striking a “delicate balance” between providing substantial support to the economy and keeping its policy of long-term debt sustainability as the country fights to recover from the pandemic’s effects.
Speaking before senior executives of American and Philippine companies in a virtual economic briefing on April 15, Dominguez said the country’s solid financial footing over the past year confirmed the correctness of the economic and fiscal reforms that President Rodrigo Roa Duterte has put in place.
These reforms reinforced the Philippines’ overall macroeconomic stability and allowed the government to respond decisively to the global health crisis, Dominguez said.
He added that despite the challenges of the pandemic, the government was able to accomplish the following:
- Allow “a temporary but controlled expansion” of the Philippines’ deficit-to-GDP (gross domestic product) ratio to 7.6% last year;
- Keep a fiscally viable debt-to-GDP ratio of 54.5%;
- Sustain its accelerated spending on the “Build, Build, Build’ infrastructure program, which is expected to increase to more than 5% of the country’s GDP until the end of President Duterte’s term;
- Stick to its socio-economic reform agenda despite the ongoing pandemic, as shown by the recent enactment of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, which makes its comprehensive tax reform program (CTRP) nearly complete.
CREATE lowers the Philippines’ corporate income tax (CIT) rate from 30% to 20% for micro, small and medium enterprises (MSMEs) and to 25% for all other firms, while providing an improved incentives package that is performance-based, time-bound, targeted, and transparent.
“I would like to emphasize that the President did not just sign CREATE into law but he vetoed nine items to ensure that it would serve its purpose as a tax relief measure and as an effective instrument in modernizing our fiscal incentives system,” Dominguez said.
He added that the government will continue to push and implement more reforms to restore the economy’s vigor.
Dominguez also said the Duterte administration is looking forward to the congressional passage of the remaining components of the CTRP.
These are Package 3, which will make the property valuation system at par with international standards; and Package 4, which aims to simplify the taxation of passive income and financial services and transactions by reducing the number of combinations of tax bases and rates from 80 to about 40.
The Finance Secretary spoke at a virtual economic briefing with the theme “Philippines-United States (PHL-US) at 75: Strengthening Ties through Sustainable Recovery.” It was organized by Philippine Ambassador to the US Jose Manuel Romualdez in Washington, DC. DOF/jlo
