President Duterte of the Philippines is on Tuesday set to sign into law a major package of tax reforms which would mark his most important legislative achievement since coming to office 17 months ago. The changes include reductions in income tax alongside hikes in indirect taxes on items such as fuel, automobiles and cigarettes. The increases in indirect taxes are likely to push up inflation. That said, the overall impact is likely to be relatively small given that the changes are set to be phased in over several years. The Department of Finance has estimated that the tax hikes will add 0.4%-points to the headline rate next year. The extra tax revenues, which are the equivalent of around 1% of GDP, will be used to fund the administration’s ambitious infrastructure spending plans. These projects should increase capacity, reduce bottlenecks in the economy and actually ease inflationary pressures over the medium term.
Become a client to read more
This is premium content that requires an active Capital Economics subscription to view.
Already have an account?
You may already have access to this premium content as part of a paid subscription.
Sign in to read the content in full or get details of how you can access it
Register for free
Sign up for a free account to gain:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services