MANILA (Reuters) - Philippine Finance Secretary Cesar Purisima on Thursday unveiled a $7 billion tax wish list he will send to his successor, which includes increasing the value-added tax and providing direct subsidies, to sustain the government’s fiscal gains.
The tax reform package, which also proposes to reform the corporate and income tax system, will be given to Carlos Dominguez, who was appointed Finance Minister by President-elect Rodrigo Duterte.
“We expect this tax reform package to generate 164.5 billion Philippine pesos ($3 billion) to 351 billion pesos ($7 billion) in additional revenues in the first year of implementation,” the Department of Finance said in a statement.
Departing President Benigno Aquino and his economic team’s drive to recharge an economy once derided as the “sick man of Asia” has improved public finances and has won the country a notch above investment grade rating from debt watchers.
Aquino and his cabinet will step down at the end of June. Aquino has a single six-year term, in line with a constitutional term limit.
Raising the VAT rate to 14 percent from 12 percent and expanding the VAT base by replacing exemptions with direct subsidies, will allow the government to lower income tax rates, the Department of Finance said.
The move should be twinned with the rationalization of fiscal incentives, it said.
The Finance department also proposed the indexation of oil excise taxes to inflation to take advantage of the low oil price environment, and stressed the need to remove bank secrecy for tax evaders and make tax evasion a crime related to money laundering.
These proposals, however, will take time as they require legislation.
Duterte, who has yet to be proclaimed the May 9 poll winner, has a huge lead over his rivals based on an unofficial vote count by an election commission-accredited watchdog. He is due to take office on June 30.
Reporting by Karen Lema; Editing by Kim Coghill