THE economic policies of the next administration will determine the Philippines’ fate in the next years, said International Monetary Fund representative to the Philippine Jay Peiris.
The official, who was at the Bangko Sentral ng Pilipinas Cebu regional office yesterday to present IMF’s world economic outlook, acknowledged that the Philippines has been growing in the past years, but more needs to be done, particularly in the area of taxation.
“For us (in IMF), it’s really about policy. Continue to work on policies rather than individuals or parties. Continue the story of Philippine growth,” Peiris told reporters at the sidelines.
“(But) what should be focused on for the Philippines (is) to really have a good policy-- that means continue to keep debt at a manageable level, keep investments for young population, create infrastructure, and you need to raise tax to GDP ratio,” Peiris added.
The IMF representative criticized the inefficiencies of the country’s taxation policy, saying there are loopholes in the system.
“The big issue with corporate tax (and income tax) is they have a high rate but we are only collecting very little. Why? Because we have lots and lots of tax holidays and exemptions. What we are saying is reduce the exemption. Exemptions are prone to problems. It’s risky since some people (big companies) benefit and seldom (do) SMEs. So reduce the exemption and make it a more level-playing field. When you can collect more from everybody, you can cut the rate, so we are saying broaden the base and cut rates,” explained Peiris.
According to Peiris, tax to GDP ratio of the Philippines is estimated to be at 15 percent. He recommended to raise this to 18 percent to boost infrastructure and social services financing.
The official maintained that that the multilateral lender IMF kept its economic growth project of six percent this year and 6.2 percent in 2017, noting that the Philippines is less vulnerable to global risks, particularly China’s slowdown and cheaper oil.
On the other hand, the global economy is expected to grow at 3.2 percent this year and 3.5 percent next year, describing the growth as “too slow” over a long period.
However, he cautioned that the Philippines and the emerging markets in general will experience higher financial borrowing cost and lower capital flows.
The IMF representative maintained that there is no looming global financial recession yet, but the risks of a “stagnant” global economic performance are increasing.
Peiris also commented on a presidential candidate’s remark on cutting ties with the US and Australia saying, “Very few countries cut ties economically. There are political statements, but economically, there are very few countries that reach (that stage).”
Recently, Davao City Mayor Rodrigo Duterte answered a hypothetical question on the possible severance of relations with Australia and the US after the ambassadors of the two countries denounced his rape joke in one of his campaign rallies. “Bahala sila. E, kung gusto nilang i-severe ang ties niyo, so be it,” the presidential aspirant was quoted as saying.
“One thing that we’ve learned is that countries (that have developed) have integrated into the global economy. With globalization and technology, it is more important that you become integrated,” reminded Peiris.