Finance Secretary Carlos Dominguez III has expressed confidence that the Philippines can sustain a 7 percent gross domestic product (GDP) growth rate over the medium term, fueled by an unprecedented infrastructure modernization program under the Duterte administration that will supercharge the economy, disperse industries to the countryside, and create jobs for the country’s young and talented workforce.
Dominguez said the government’s P8.4-trillion “Build, Build, Build” infra program will be the key driver of the country’s growth over the next few years, with investments increasing to about 7 percent of GDP, higher than the average in the Association of Southeast Asian Nations (ASEAN) region.
“The 6.5 percent growth for the first semester makes the Philippines the second fastest growing economy in Asia after China. We retain the 7 percent growth rate target for the year, spurred by the investment spending in the infrastructure program. We believe this growth rate is sustainable well into the medium term,” Dominguez said at a recent business forum.
“Increased investments in modernizing the country’s infrastructure will be the key driver of our growth the next few years,” he said. “These investments seek to bring up our infra to match those of our most progressive neighbors. By modernizing our infrastructure, we will address congestion in our ports, airports and roads.”
To maintain fiscal discipline while embarking on this infra buildup plan, he said the government is working on the congressional approval of a tax reform package in order to spell a steady revenue stream for its priority investment programs.
“Investing in infrastructure has the highest multiplier effect on the economy. It creates construction jobs in the short term and manufacturing jobs in the long term. It improves land prices, assists in raising our agricultural productivity and encourages dispersal of our industries into the regions,” Dominguez said.
According to Dominguez, infrastructure is “the key to overcoming the challenges posed by our archipelagic topography, especially uneven regional development and isolated island economies.”
“The quality of our infrastructure fell behind those of our neighbors because of many years of under-investment. While we grappled with the debt crisis and imposed austerity, our investment in new infra fell to nearly half the regional average. Over the past year, we have doubled spending on infrastructure as a percentage of GDP. In the coming years, we plan to increase economic investments to about 7 percent of GDP, higher than the regional average,” Dominguez said.
He said the Philippines can no longer postpone infrastructure modernization and increased investments in human capital development, given the changing economic landscape in the ASEAN region, which is swiftly clearing the way toward regionalization.
The Philippines, Dominguez said, has a relatively younger workforce than those of its neighbors in the region, which can be transformed into a “demographic dividend” if the country invests heavily in education, health and other forms of human capital formation.
“The task is made easier by the increased regionalization of the economy. By 2022, we expect a functioning common market for the ASEAN region. By bringing our infra to regional standards, lowering power costs and improving on governance, regionalization should translate into greater trade and more intensive economic exchanges,” Dominguez said.
“The timetable set by the ASEAN Free Trade Area (AFTA) means we can no longer postpone modernization of our infra and postpone the training of our young to be functional in a globalized economy. We can no longer have a deficient bureaucracy and substandard governance,” added Dominguez.
He said the government is “ready to meet the challenges of regionalization and confident this will work for our people’s betterment.”
“This is what the promise of change is all about. This is what the present government intends to accomplish,” Dominguez said.
The finance chief said the “Build, Build, Build” program will initially be funded by official development assistance, which includes “a significant amount of grants,” and will later be supplemented by “budgetary outlays and various forms of public-private partnerships.”
Duterte admin to run after more tax evaders
Finance Secretary Carlos Dominguez III said the Duterte administration is determined to run after tax evaders, but with due process strictly observed in carrying out this goal.
“Our target are the guys who don’t pay their taxes, whether they’re a corporation or affluent individuals,” Dominguez said.
He said the Duterte administration is setting its sights first on efforts that will yield the most gain for the government.
“Just like Mighty (Corporation)… That’s where we put our effort. Of course the ones where the yields are higher,” Dominguez told reporters.
“First of all, we have to have good evidence that they are cheating on the tax,” he said. “It’s not just because you’re rich, we’ll go after you. That’s not fair also.”
Dominguez said, “If there’s evidence that you haven’t paid your tax — like for instance, we conduct a raid on the company and we see that there are a lot of untaxed goods that haven’t been …. of course we will go after that.”
“So it’s a lot of forensic investigation, forensic accounting, looking at the industry, you know, benchmarking, how come this guy has this percent of the market and pays only so much,” he added.
According to Department of Finance (DOF) data, the takeover by Japan Tobacco Inc. of Mighty Corp. has led to a 2o0-percent increase in the excise tax payments for the September-October period alone for this cigarette manufacturer compared to the same period last year.
The DOF said Mighty Corp. paid P1.002 billion in excise taxes for September 2016 and another P1.069 billion in October of the same year, or a total of P2.071 billion for this two-month period.
For the same two-month period this year, the amount of excise tax payments from Mighty Corp. when it was taken over by Japan Tobacco increased to P6.2 billion, representing a 2o0 percent hike in sin tax collections from the firm.
Dominguez earlier said preliminary computations done by the DOF and the BIR show that Japan Tobacco will pay a minimum of P3.1 billion a month starting January 2018, which is about P2 billion more per month than what Mighty Corp. had previously been paying.
“For Fiscal Year 2018, JTI is expected to pay almost P40 billion out of the estimated P118 billion in total excise tax collections on tobacco products,” Dominguez said.
The amount represents a third of the total revenue collections from the excise tax on cigarettes.
Japan Tobacco completely took over the operations of Mighty Corp. last September after the latter sold its manufacturing assets and other properties to the Japan-based cigarette manufacturing company to be able to settle its tax liabilities with the government in the amount of P25 billion.
Dominguez said the government stands to gain P30 billion from the settlement once the value-added tax and other fees from the sale are included.
This amount represents the biggest tax settlement ever from a single corporate entity in the country’s history.