Neda chief: Revise ‘obsolete taxes’ to raise more funds

THE country’s outgoing Socioeconomic Planning Secretary believes the next administration would do well to target the revision of “obsolete taxes” to help raise revenues.

According to National Economic and Development Authority (Neda) Director General Karl Kendrick T. Chua, one of the features of a good tax system is for them to be regularly reviewed.

This will help maintain the value of these taxes and maximize their impact on the government’s revenues. Chua was the architect of the country’s tax reform system prior to his appointment to the Neda 25 months ago.

“When we do a tax reform, we program over the medium term, three to five years, that’s why we have indexation. Now, if you don’t go back to it, the price will fall relative to the general price,” Chua told reporters on Thursday.

“You need to consider some tax rates that are obsolete. And that’s really what I think the next administration could revisit immediately. Especially tax rates that are not indexed to inflation,” he also said.

Chua said raising tax rates is just one option in shoring up public funds through the tax system. He said collecting existing taxes is important as well as the removal of exemptions.    

He noted that in the Philippines, some Filipinos pay the full 12 percent value added tax while others pay zero. That, to him, was unfair and must be addressed in the next administration.

Chua cited a need to maintain exemptions only for raw food, health, education, and the agriculture sector. The rest of the exemptions should be removed in order to broaden the tax base.

“For me, the best tax system is a low-rate and broad-based [one]. That’s why originally we were proposing that we’re okay with a lower VAT rate but keep exemptions limited to raw food, health, education and agriculture. But now, we still have so many exemptions,” Chua said.

Hits and misses

Introducing reforms, Chua said, are best done at the start of a new administration when there is still less pressure. This early start could also benefit the vital pending reforms that were not passed under the current administration.

Chua said these include Packages 3 and 4 of the Comprehensive Tax Reform Program (CTRP) which, he said, aim to address inequality. These are essentially “wealth taxes” that will somehow reduce the gap between the rich and poor.

Other reforms that the next administration should consider, he said, are the National Land Use Act, which has been deemed a priority bill every year by the President in the past six years, but has not been passed by Congress.

Chua also said another “miss” are efforts that placed greater emphasis on climate change as well as those that could have “connected the dots” when it came to education.

He said the Neda is proposing an Apprenticeship bill to address limitations in the Labor Code that placed restrictions on apprenticeship. If passed, this will be of great help to graduates of the K-12 program.

Apart from passing pending legislation, efforts to maintain the country’s fiscal prudence must be observed by the incoming administration. Chua said fiscal prudence has been maintained for the past three administrations and it would be ideal to continue this.

Chua also said game changing reforms such as the Build, Build, Build must be continued. He said by the end of the Duterte administration, some 17 projects would be completed.

However, there 77 projects that are ongoing construction and are beyond shovel-ready and some 25 projects that have not yet been approved. These 25 projects, Chua said, already have feasibility studies that only need to be evaluated.

“In other words, the next administration is going to start on a very solid foundation for infrastructure. They don’t need to spend over three years doing procurement and feasibility studies,” Chua noted.