MANILA - Congress approved late Wednesday a tax reform bill President Rodrigo Duterte needs to push ahead with his economic agenda, with the measure expected to raise P92 billion in revenues in its first year.
Although the estimated tax take is less than the Department of Finance had hoped to raise, Finance Secretary Carlos Dominguez described the bill as "the best gift the government can give to our people".
Duterte, who took office more than 17 months ago, has promised to usher in a "golden age of infrastructure" by raising annual spending on it to more than 7 percent of gross domestic product from less than 3 percent before he began his term.
Although his presidency has so far been defined by a bloody war on drugs, the firebrand leader has thrown his weight behind the tax bill to help fund his six-year $180 billion "Build, Build, Build" program.
The bill, called the Tax Reform for Acceleration and Inclusion (TRAIN), is one of the five tax packages Duterte is pushing to increase state revenues and make the tax system fairer and simpler.
"We are now ready for the TRAIN to leave the station," Dominguez said in a statement.
The reforms will lower personal income taxes, expand the value-added tax base, raise taxes on petroleum products, automobiles and slap taxes on some sugar-sweetened beverages, among others.
The final version of the bill, which will be sent to Duterte for signing before the year ends, is expected to raise P92 billion ($1.8 billion) for the state in the first year of implementation, below the P162 billion the government had sought.
The peso rose to as high as 50.35 per U.S. dollar in morning trade on Thursday, from Wednesday's close of 50.48.
The benchmark stock index was up 0.2 percent by noon break.
"This is a positive development," said Michael Wan, analyst at Credit Suisse in Singapore. "The final bicameral bill is slightly more supportive for headline private consumption compared to the initial House bill."
The bill will also raise excise taxes on both local and imported coal, despite attempts by some lawmakers to exempt coal producers from duties.
The government's tax reform initiative was one of the reasons cited by Fitch Ratings when it upgraded the Philippines' sovereign credit rating on Monday, aligning it with those of peers Standard & Poor's and Moody's Investor Services.
"We estimate the bill to be net revenue positive," Fitch said in a statement, adding it bodes well for progress of other reforms over the next couple of years.
Lawmakers said 70 percent of the revenue generated by tax measure would go to infrastructure, while the rest would be used for social services.
Congress also approved on Tuesday the government's proposed $3.77 trillion peso budget for 2018.
Duterte's government is pinning his economic growth plans on infrastructure projects to create jobs, stimulate the economy, and attract foreign investors put off by high power prices and transport bottlenecks.