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Bacolod City, Philippines Wednesday, June 12, 2019
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Faith in tax reform

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A top World Bank official has lauded the Philippine government’s comprehensive tax reform program that aims to raise enough funding for public infrastructure and social services that lay the foundation for long-term, high growth.

Lalita Moorty, the World Bank Director of Macroeconomics, Trade and Investment, said it is “quite a change” to see a country implementing tax reform proactively with an eye on sustained growth, unlike the common practice for countries to implement such reforms only when they are in the middle of a fiscal crisis. She said this was impressive because the government has enabled the economy to “grow so much” even as it has managed to bring down the debt-to-GDP (gross domestic product) ratio.

Moorty has been impressed by the Philippines recent accomplishments on the economic front, especially in implementing a tax reform program to enable the government to aggressively increase its investments on infrastructure and social services.

She described the implementation of the Duterte administration’s tax reform program absent a crisis, as a “pro-active and forward-looking” approach to carrying out such reforms. In a statement, Moorty also lauded the tax reform program’s clear priorities of earmarking spending for infrastructure and social services, which she said, “are two critical elements when you are laying foundations for long-term growth.”

“When I think about comparing the Philippines to other parts of the world, it’s managed to do so much and grow so much while bringing its public debt-to-GDP ratios down. It’s very impressive that… it went from over 50 percent to around 40 percent in a decade. That’s quite impressive, in contrast to other countries where we’re seeing a rise in the public debt-to-GDP ratio,” Moorty noted.

Despite some hiccups such as a spike in inflation right after implementation, the first tax reform’s revenues reached P68.4 billion last year, achieving 108 percent of its full-year target of P63.3 billion.

The first tranche of the TRAIN Law may have been the subject of ridicule for its unintended consequences that impacted the nation’s poor, but it has been passed and despite a slow start, Filipinos need any well-intended and long-overdue tax reform law to work as intended and reap the advertised benefits.

If a World Bank Director can see the positives and potential of the tax reform law, Filipinos who are already in for a penny, in for a pound might benefit from giving it more latitude to do the magic that it was designed to do.*


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