Finance Secretary Carlos G. Dominguez III
S&P GLOBAL Ratings’ recent sovereign rating upgrade of the Philippines should convince lawmakers to pass the whole of Comprehensive Tax Reform Package (CTRP) so the country can get an “A”-level grade “in two years,” Finance Secretary Carlos G. Dominguez III said on Friday.
“I’m sure that the Senate and the House, the Senate in particular, can see the benefits of what they did (with TRAIN). They are the ones who enabled this credit upgrading by passing the bill,” Mr. Dominguez was quoted as saying in a statement.
The first CTRP package — the Tax Reform for Acceleration and Inclusion (TRAIN) Law — was cited by S&P as among the key strengths that led it to raise the Philippines’ long-term sovereign credit rating from BBB to BBB+ with a “stable” outlook — just a step away from an “A”-level rating.
S&P also said in its assessment report that the passage of the rest of the CTRP packages could lead to another credit rating upgrade. Mr. Dominguez said the administration’s economic team will work on getting an “A” rating “in two years.”
A higher credit rating lets the government and private companies here borrow funds abroad at a cheaper cost.
Mr. Dominguez said a debt rating upgrade will save the government roughly P3 billion in interest payments on its debt securities issued earlier this year.
“That goes to the benefit of the Filipino people. We have another P3 billion that we can spend for education, for healthcare. So there are positive benefits from this, and I hope that with this credit rating upgrade recently, the Senate will really consider passing these bills that will redound to the benefit of the Filipino people,” Mr. Dominguez said.
“What S&P really is saying (in its report) is this is the roadmap to a second upgrade. It’s right there, all you have to do is follow it: Complete the tax reform program; sustain the deficit at 3%, don’t increase it in other words; lower your debt-to-GDP ratio, it’s all there,” Mr. Dominguez added.
S&P said in its report on the country’s sovereign credit rating upgrade last month that i may raise ratings over the next two years “if the government makes significant further achievements it its fiscal program, or if the country’s external position improves such that its status as a net external creditor becomes more secure over the long term. We may also raise the ratings if we find that the institutional settings in the Philippines have improved markedly.”
The Department of Finance is also urging Congress to pass the bills further raising excise taxes on tobacco and alcohol; increasing the government’s share from mining operations; lifting bank secrecy laws and ensuring the automatic exchange of tax information; reforming the property valuation system of local government units; and rationalizing capital income taxation.
“I want a big push on this,” Mr. Dominguez said, referring to the rest of the CTRP bills pending before Congress. — R.J.N. Ignacio