The Department of Finance (DOF) said the first package of the Tax Reform for Acceleration and Inclusion (TRAIN) Law provides ample fiscal space for the government to fund programs that support economic growth.
In its Economic Bulletin on GDP, the department said Package 1 of the TRAIN Law will bring in additional resources for the government to finance its Build Build Build Program, as well as greater spending on social services.
“These investments are game-changing in the sense that they catalyze further investments, which, in turn, drive investment-led growth, generate meaningful employment, and subsequently reduce poverty,” the DOF said.
On Thursday, government data showed that gross domestic product (GDP) in the first quarter of 2018 grew by 6.8 percent, led by industry at 7.9 percent, services at 7 percent, and agriculture at 1.5 percent.
The DOF noted that aside from strong household consumption, government consumption was also robust in Q1 2018.
Government consumption increased by 13.6 percent in Q1 2018, a big jump from Q1 2017’s growth of 0.1 percent. This also surpassed household consumption in January to March 2018, which grew by 5.6 percent compared to the same period last year.
Government data also showed that tax revenues increased by 14.3 percent in the first three months of the implementation of the TRAIN Law, higher than the 13.4-percent increment in tax revenues in the same period last year.
The TRAIN Law provides new sources of tax collection for the government, such as excise taxes on oil products, automotive vehicles, and sugar-sweetened beverages.
The additional tax collection is intended for the government’s Build Build Build Program to improve infrastructure and connectivity throughout the archipelago, as well as enhance the quality of the local workforce by investing in human capital development.
“Strong macroeconomic fundamentals, such as strong external position and ample fiscal space, will continue to sustain the momentum for high growth,” the DOF said.