the tax reform program impact on the people and the economy

The Tax Reform Program Impact on the People and the Economy

ROSEMARIE G. EDILLON

Undersecretary

National Development Office-Policy and Planning

1 with the 99: A Forum on Tax ReformJuly 5, 2017

1 with the 99NEDA is

AmBisyon Natin 2040

3

“In 2040, we will all enjoy a stable and comfortable lifestyle, secure in the knowledge that we have enough for our daily needs and unexpected expenses, that we can plan and prepare for our own and our children’s future. Our family lives together in a place of our own, and we have the freedom to go where we

desire, protected and enabled by a clean, efficient, and fair government."

4

From vision to actionLong-term Developmental Goals

By 2040, Philippines will be a

• prosperous,

• predominantly middle-class

society

• where no one is poor;

Our peoples will

• live long and healthy lives,

• be smart and innovative and

• live in a high-trust society2017-2022

2023-2028

2029-2034

2035-2040

Competitive Enterprises Needed

AgricultureHousing and

Urban Development

Manufacturing

Transport and

Communication

Tourism &

Allied ServicesFinancial Services

5

Countryside

Development

Education services

Health services

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More and Better Infrastructure

7

Adequate (quality, quantity, affordability) Social Services

7/5/2017

“MALASAKIT”ENHANCING THE SOCIAL FABRIC

“PAGBABAGO”REDUCING INEQUALITY

“PATULOY NA PAG-UNLAD”INCREASING GROWTH POTENTIAL

Expandeconomic

opportunities

Increase accessto economic

opportunities

TO LAY DOWN THE FOUNDATION FOR INCLUSIVE GROWTH, A HIGH-TRUST AND RESILIENT SOCIETY, AND A GLOBALLY-COMPETITIVE KNOWLEDGE ECONOMY

MATATAG, MAGINHAWA AT PANATAG NA BUHAY

Advancetechnologyadoption

Stimulateinnovation

IMPLEMENT STRATEGIC TRADE AND FISCAL POLICY, MAINTAIN MACROECONOMIC STABILITY, AND PROMOTE COMPETITION

Ensure people-centered, clean, and efficient governance

Pursue swift and fair administration of justice

Promote Philippine culture and awareness

Reduce vulnerability of individuals

Reach for demographicdividend

Acceleratehuman capitaldevelopment

Ensure peace and security Accelerate strategic infrastructure development

Ensure safety and build resilience

Ensure ecological integrity, clean and healthy

environment

2022

2040

PDP 2017-2022 Overall Strategic Framework

PDP 2017-2022 Targets

Indicator BaselineTarget by

2022

Per capita income (US$ PPP, Atlas Method) 3,550 (2015) 5,000

Human development index Medium level High level

Poverty incidence in rural areas (%) 30 (2015) 20

Poverty incidence overall (%) 21.6 (2015) 13-15

Subsistence incidence (%) 8.1 (2015) 5

Unemployment rate (%) 5.5 (2016) 3-5

Youth unemployment rate (%) 11 (2016) 8

Underemployment rate in AONCR (%) 19.7 (2016) 16-18

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Tax Reform Program

• Simpler, fairer and more efficient tax system

✓ Progressive income tax schedule

✓ Corrects horizontal and vertical inequities

✓ Lower personal income tax rates and broader base

• Provides additional revenues

• Sustainable source of financing for public infrastructure and

social services

Country Individual Top Tax Rate Top Tax Bracket

(in US Dollars)a/

Singapore 22 231,481.5

Malaysia 28 232,700.0

Indonesia 30 35,000.0

Philippines 32 10,000.0

Thailand 35 146,995.0

a/ Converted using the prevailing exchange rate (National Currency/US$) as of July 3, 2017

Source: Worldbank for the GDP per capita and KPMG database (https://home.kpmg.com/xx/en/home/services/tax/tax-tools-and-resources/tax-rates-online/individual-

income-tax-rates-table.html)

Top Tax Base in selected ASEAN countries

Tax Reform will support the achievement of the Ambisyon 2040-Philippine Development Plan Goals and Strategies.

Industry & Services Connectivity/Logistics Education/ Skills Dev’t. Housing/urban Dev’t.

Agriculture Dev’t. Financial Inclusion Medical/Social Services

BUILD! BUILD! BUILD!

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Adequate (quality, quantity, affordability) Social Services

1.62

0.31

0.57

0.81

1.02

1.01

1.05

1.16

1.27

1.60

2.75

0.00 0.50 1.00 1.50 2.00 2.50 3.00

Total

First decile

Second decile

Third decile

Fourth decile

Fifth decile

Sixth decile

Seventh decile

Eighth decile

Ninth decile

Tenth decile

Share of Fuel for Personal Transportation Expenditure toTotal Expenditure, Per Decile

Share of Fuel for Personal Tranpo to Total Expenditure, in percent

Source: PSA 2015 Family Income Expenditure Survey, NEDA Staff Estimates

0.38

0.41

0.46

0.50

0.48

0.49

0.47

0.45

0.41

0.36

0.26

0.00 0.10 0.20 0.30 0.40 0.50 0.60

Total

First decile

Second decile

Third decile

Fourth decile

Fifth decile

Sixth decile

Seventh decile

Eighth decile

Ninth decile

Tenth decile

Share of Softdrink Expenditure to Total ExpenditurePer Decile

Share of Softdrink Expenditure to Total Expenditure, in percent

Source: PSA 2015 Family Income Expenditure Survey, NEDA Staff Estimates

Mitigating Measures

Targeted Transfers

• Targeted cash transfers (subsidy for the poor and vulnerable)

• Pantawid Pasada (subsidy for PUVs)

• Pantawid Kuryente (subsidy for SPUG areas)

• PUV Modernization Program

• Social welfare card/national ID

1 with the 99NEDA is