DOF advocates for stronger inter-agency cooperation to rationalize tax expenditure, improve taxpayer trust

The Department of Finance (DOF), together with the Addis Tax Initiative (ATI), called for stronger inter-agency cooperation to reduce wasteful tax expenditures and boost trust in the tax system for more effective revenue mobilization.

“We are one with the ATI in advocating for a robust inter-agency cooperation on tax expenditures, improving taxpayers’ trust, and fostering the coordination of granting tax concession activities,” said Finance Secretary Benjamin Diokno during the ATI Regional Workshop on Tax Expenditures on March 1, 2023 at the Seda Hotel, Bonifacio Global City.

In collaboration with the Council on Economic Policies (CEP), the German Institute of Development and Sustainability (IDOS), the United Nations Development Programme (UNDP), and the DOF, the three-day regional workshop convenes international tax experts to engage in productive discussions on the reduction of unnecessary tax expenditures and its critical role in tax systems around the world.

In his welcome message, Secretary Diokno said that high inflation, supply chain disruptions, and climate change continue to put countries at risk.

“This challenge requires prudent fiscal management to ensure that taxpayers’ money is put to good use. [G]overnments must reallocate and reprioritize public expenditures to support vulnerable groups without further straining fiscal space,” said Secretary Diokno.

According to the Secretary, the country’s economic objectives and the Sustainable Development Goals (SDG) can only be achieved by modernizing tax systems towards efficient mobilization of domestic revenues.

“The Philippine government recognizes the importance of broadening the tax base to boost revenue collection, easing the tax burden on our people, and maintaining fiscal sustainability,” said Secretary Diokno.

Over the years, the government has pursued a series of tax reforms to establish a simpler, fairer, and more efficient tax system.

The Tax Reform for Acceleration and Inclusion (TRAIN) Act provided relief to 99 percent of taxpayers through personal income tax cuts while generating revenues. Since 2018, it has raised PHP476.1 billion in additional revenues to fund the government’s infrastructure, social, and healthcare programs.

Meanwhile, the landmark Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act transformed the corporate tax regime and modernized the structure of the tax incentive system to be more targeted, transparent, time-bound, and performance-based.

Furthermore, Secretary Diokno shared that the Philippines is equipped with the Medium-Term Fiscal Framework (MTFF) to mitigate risks while enabling the government to maintain essential spending, stabilize debt, and build investor trust. The MTFF also puts a sharp focus on efficient tax administration through digitalization.

“These programs have proven crucial in the government’s revenue generation capabilities necessary for addressing entrenched and emerging problems as well as improving overall economic health,” he said.

The workshop was attended by participants from 16 countries to share technical expertise, best practices, and standards for proper fiscal management and systematic reporting on tax expenditures of governments.