President Arroyo's Economic Agenda: A New Path Forward for the Philippines

Strategic Insights -

President Gloria Macapagal Arroyo has outlined a comprehensive economic agenda aimed at creating 6-10 million jobs, balancing the budget, and institutionalizing reforms in the economic and social systems within six years. The agenda, which includes eight legislative measures, is designed to broaden the tax base, improve tax collection efficiency, and raise additional revenues to meet the government's targets. The President has also proposed administrative measures to help raise additional revenues and reduce costs.

The economic package includes a shift to a gross income tax system, replacing the value-added tax (VAT) with a simpler tax, a tax on windfall income of telecommunication companies, and indexation to inflation of sin taxes on cigarettes and alcohol. The plan also involves the rationalization of tax incentives, adjustment in the excise tax and tariff on petroleum products, and the use of targeted tax amnesty.

Key Takeaways:

  • The President's economic agenda aims to create 6-10 million jobs and balance the budget within six years.
  • The plan includes eight legislative measures to broaden the tax base, improve tax collection efficiency, and raise additional revenues.
  • The President has also proposed administrative measures to help raise additional revenues and reduce costs, including using the nation's resources, reducing costs, increasing specific fees and charges, and capturing more of the revenue potential of selected government-owned and controlled corporations.
  • The Bangko Sentral ng Pilipinas proposes measures to develop the country's capital market to attract foreign investment inflows and provide investment vehicles for small investors.
  • The Governor of the Bangko Sentral ng Pilipinas, Rafael Buenaventura, emphasizes the need for a strong regulatory environment, including amendments to the charters of the Securities and Exchange Commission and the BSP, to protect investors and ensure the growth of the corporate bond markets.
  • The Governor also highlights the need to protect investor interests by enacting the Corporate Recovery Act, which would amend the bankruptcy law to balance the rights of lenders and borrowers.

Statistics:

  • The government aims to raise an additional P100 billion (US$1.7 billion) a year to balance the budget by 2009.
  • The President's economic measures are expected to generate additional annual revenues of over P80 billion and administrative reforms to generate savings of about P20 billion.
  • The country's capital market is expected to grow with the development of infrastructure, including the proposed amendments to the charter of the BSP to strengthen its powers in regulating the capital market.
  • The Personal Equity Retirement Account (PERA) bill is expected to generate new savings rather than simply transfer existing ones from one instrument to another.
  • The Corporate Recovery Act aims to amend the bankruptcy law to balance the rights of lenders and borrowers.

Sources:

  • Asia Pulse, "Arroyo's Economic Agenda Aims to Create 6-10 Million Jobs, Balance Budget", July 23
  • Bangko Sentral ng Pilipinas, "BSP Governor Rafael Buenaventura's Speech", July 23
  • Philippine News Agency, "President Arroyo Shares Economic Agenda Before Business Leaders", July 23