World Bank says sin tax reform 'urgently' needed

MANILA, Philippines - The World Bank says there's urgency to pass the proposed sin tax bill to raise revenues needed to boost growth.

World Bank Country Economist Karl Kendrick Chua says the World Bank supports the Abaya version in particular, noting that the current four-tiered system "distorts production", and that indexing the tax rate to inflation will shore up collection.

The Washington-based lender expects the Philippine economy to grow by 4.2% this year, from last year's 3.7%. It says public spending needs a lot of catching up to do.

Chua says it is "most important" that the government's infrastructure projects are "well-prepared". "Quality is more important than quantity," Chua said.

The World Bank, in its Quarterly Update, says the labor market remains weak, with more than 80 percent of new jobs created were in the informal sector and real wages have not increased.

World Bank lead economist Rogier van den Brink says the Philippine economy can grow above 5% if it will speed up critical reforms such as raising tax revenues and enhancing competitiveness to attract more investments.