MOODY'S Investors Service has lauded the passage of the first package of the Duterte administration's tax reform program by the House of Representatives, saying it is "credit positive."
The credit rating agency, in a statement Monday, said the passage of the Tax Reform for Accreditation and Inclusion (Train) is credit positive "because it will address the Philippines' weak revenue generation."
The Train bill, which awaits approval by the Senate, is also crucial to maintaining narrow fiscal deficits since President Rodrigo Duterte's administration intends to ramp up infrastructure spending over the course of its term in government through 2022, it noted.
"The passage of the tax reform also demonstrates the capacity to implement reform amid the political controversies around the government's focus on security and the war on drugs," Moody's said.
The passage of the bill would boost revenue and improve the Philippine government's debt affordability, as measured by interest payments as a share of revenue, it said.
While the government's revenue has improved, Moody's said the Philippines still collects less revenue than most Baa-rated peers.
In the absence of tax reform, fiscal deficits could widen beyond the 3.0 percent of gross domestic product currently envisioned in the government's projections to 2022, potentially reversing the debt consolidation trend that started in 2010, Moody's said.
Before Congress adjourned its session last week, Duterte certified as urgent the passage of the Train bill at least in the House of Representatives.
Under the Constitution, all appropriation, revenue or tariff bills, bills authorizing increase of the public debt, bills of local application, and private bills shall originate exclusively in the House of Representatives, but the Senate may propose or concur with amendments. (SDR/VoxPop Philippines)