THE Department of Finance (DOF) wants the incoming Marcos administration to impose new taxes, among other measures, to shore up the country’s finances gutted by the country’s fight against the coronavirus disease (Covid-19) pandemic.
“Imposing new taxes, deferring personal income tax reductions and repealing some tax exemptions are some of the proposals of the Department of Finance to the incoming Marcos Administration to raise the much-needed government revenues,” Presidential Spokesperson Martin Andanar said in a statement Thursday, May 26, 2022.
“However, we leave this matter, and other ways to mobilize resources, to the wisdom of the President-elect’s Economic Team,” he said, referring to the incoming administration of Ferdinand “Bongbong” Marcos Jr.
On Wednesday, the DOF had said it would present to the Marcos administration a fiscal consolidation and resource mobilization plan “critical” to helping the government grow out of its pandemic-induced debt, and provide substantial buffers for economic shocks.
“This new series of measures aims to reverse in a span of 10 years the additional P3.2 trillion debt incurred by the Philippine government due to the Covid-19 pandemic,” the DOF said in a statement.
Officer-in-Charge Undersecretary Valery Joy Brion, who heads the DOF Domestic Finance Group, said the plan would involve raising more revenues, improving tax administration and channeling resources from unnecessary and non-priority expenses to productive spending.
Brion said the DOF’s proposed measures include “a broad-based tax system where all Filipinos contribute their fair share”; cover areas that should be taxed anyway, such as the digital economy; and corrective revenue measures that will “result in improved social outcomes, such as achieving the health objectives of sin taxes and curbing the social ills of gambling through taxation.”
Reacting to the DOF’s pronouncements, organization Bayan said: “We oppose the new round of taxes proposed by the Department of Finance. ... The people should not be made to shoulder the giant debts of (the) Duterte (regime), especially in light of serious cases of corruption and procurement overpricing amounting to billions of pesos.”
“Much of the newly incurred debt were supposedly due to the pandemic, and there remain questions on where the money actually went and how the emergency procurements were done under the Bayanihan Act,” Bayan media officer Christian Yamzon said.
“It is also unjust to pass on the debt burden to the people in the form of new taxes when government is not able to improve tax collection and go after tax evaders and plug tax leaks,” Yamzon said.
“The VAT (value-added tax) on digital services providers will impact ordinary consumers, especially those dependent on the internet including students and teachers,” Bayan said. “The P1 per liter additional excise tax on petroleum products for three years is oppressive and ignores the fact that oil prices are so high now, people actually want a reduction in oil taxes. The return of the excise tax on motorcycles will impact ordinary folks who use this as their means of transportation.”
“Government should work on taxing the super-rich rather than imposing new taxes on small consumers,” Yamzon said.
Finance Secretary Carlos Dominguez III said the country’s budget deficit had increased as revenue collections sank due to reduced economic activity during the pandemic and spending skyrocketed “to protect lives, beef up the country’s healthcare capacity, procure vaccines, and provide subsidies to vulnerable sectors.”
The government had also continued spending on the Build, Build, Build priority programs to generate jobs and spur economic recovery, as well as spent for the rollout of the distance learning program for public school students, and provided special risk allowances and free rides to medical frontliners as the pandemic brought mobility restrictions.
Brion said the P3.2 trillion additional debt had caused the country’s debt-to-GDP (gross domestic product) level to hit 63.5 percent, exceeding the internationally prescribed best practice of 60 percent of GDP.
By next year, the Philippine government would have to begin principal payments for the loans incurred over the past two years, she said. The pandemic began in March 2020.
Brion thumbed down more borrowing to manage the country’s productive spending and debt management, saying increasing the country’s debt level would not only open the country to a downgrading of its investment-grade credit ratings, but also hike interest payments, reducing resources available for productive spending.
Cutting spending to reduce the budget deficit would also hamper the country’s economic recovery and lead to budget cuts on education, health, infrastructure and other socioeconomic priorities, Brion said, which is why raising revenues is the best option.
To prevent having to use debt to pay the country’s P3.2 trillion additional debt, the Bureau of the Treasury says the government would have to raise at least P249 billion yearly in incremental revenues for the next 10 years.
The DOF’s proposed measures are seen to yield about P284 billion yearly for the national government.
The National Government’s outstanding debt hit a record P12.68 trillion at the end of March 2022. (CTL)