FEF Concludes 2023 Fellows Meeting with Focus on Education Reform and Tax Policies

Manila, November 29, 2023 – The Foundation for Economic Freedom (FEF) wrapped up its final Fellows Meeting of the year on November 29, 2023, featuring presentations by two speakers. Dr. Victor Limlingan Jr., Chairman of Cristina Research Foundation and Regina Capital Development Corporation, and Dr. Karlo Adriano, Assistant Secretary and OIC-Undersecretary of the Department of Finance (DOF), shared insights on crucial topics – the reform of the Philippine basic education system and the current administration’s tax reform policies, respectively.

Starting the discussion, Dr. Limlingan delved into the current state of basic education in the Philippines, emphasizing the nation’s placement in the OECD’s Programme for International Student Assessment (PISA). Highlighting the disparity between public and private education, Limlingan pinpointed the managerial challenges faced by public school administrators due to educational shortages and underutilization, issues not shared by their private counterparts.

Expressing concern for the future professionals of the Philippines and the overall impact on the economy, Limlingan urged immediate action from FEF and its partners. He advocated for an expansion of the Philippine voucher system, endorsing its ability to subsidize private education for financially challenged families. Citing positive feedback from surveys and polls, Limlingan proposed the voucher system as a potential permanent government program.

In addition to the voucher program, Limlingan presented a comprehensive plan to address the identified challenges. He proposed the devolvement of public elementary and high schools to Local Government Units (LGUs), drawing parallels with successful models in the United States, Norway, Brazil, and Indonesia. Limlingan offered three specific options: devolution to pamantasans, devolution to local school boards, or the establishment of public-private partnerships, all aimed at mitigating DepEd’s management challenges.

As a pivotal solution, Limlingan advocated for the creation of a Philippine Education Development Fund (PhilEd), designed to separate financing from operation, mirroring the successful relationship between the Department of Health (DOH) and PhilHealth. PhilEd, Limlingan asserted, would serve as a vital source of funding for Filipino education dreams, enabling children to enroll in courses at schools of their choice, secure pre-need education plans, and access reliable lifelong learning organizations (LLOs). Concluding his presentation, Limlingan expressed hope that FEF and its partners would collaborate to influence Congress members to champion a Universal Education Financing Law that would establish PhilEd.

Adriano followed the discussion, presenting the priority legislative measures of DOF, encompassing an 8-point socioeconomic agenda for a robust, inclusive, and resilient society. Adriano focused on his office’s role in ensuring sound fiscal management and outlined five priority legislative measures targeted for passage by the end of 2023 or early 2024. These measures include VAT on digital services, rationalization of the Mining Fiscal Regime, package 4 of the CTRP (PIFITA), Motor Vehicle User’s Charge (MUVC), and excise tax on single-use plastics.

Regarding the VAT on digital services, Adriano clarified that the DOF is not proposing a new tax but strengthening the BIR’s authority to collect VAT on digital transactions. Successful imposition, according to Adriano, can generate an additional P100 billion from 2024 to 2028 for more socio-economic programs. Adriano discussed the complex tax situation of the mining sector, proposing reforms to simplify the fiscal regime, impose royalty tax, introduce a windfall profit tax mechanism, and ensure transparency and accountability.

Addressing MUVC reforms, Adriano expressed the DOF’s desire to simplify rates, provide automatic adjustments to inflation, and enhance responsiveness to the road sector’s needs.

In his final point, Adriano discussed the excise tax on single-use plastics, proposing a tax rate on bags at P100 per kilogram, indexed at 4 percent annually from January 01, 2026. Adriano highlighted a World Bank study revealing Asia’s significant contribution to global plastic leakage, with the Philippines as the largest contributor. Revenues from this tax, according to Adriano, will be earmarked for DENR’s solid waste management programs.

Adriano concluded by expressing the necessity of these reforms to mitigate risks, enhance resilience, and sustain a high-growth trajectory in the medium-term.

The Fellows Meeting is a monthly event held by FEF to discuss prevalent economic issues with economists, policymakers, and other decision-makers in the Philippines.