The national government (NG) may need to impose new taxes or raise tax rates in order to meet its revenue goals, GlobalSource Partners said.
In a report, GlobalSource country analyst Diwa C. Guinigundo said that the government is “bent on depending on intensified tax collection to fund the deficit.”
“This course may have its natural limits and sooner or later, additional or higher tax rates may be inevitable,” he said.
“With the persistent issues in governance, the old formula of intensifying tax collection and ensuring compliance with tax laws may not deliver sufficient revenues,” he added.
Finance Secretary Ralph G. Recto has reiterated there are no plans to introduce new taxes apart from the reform measures pending in Congress.
Instead, the Finance department is seeking to rely on enhanced tax administration and ramping up nontax revenues, such as privatizing state assets.
The latest data from the Bureau of the Treasury (BTr) showed that the NG’s budget deficit in the January-May period widened by 24.06% to P404.8 billion as spending outpaced revenue growth.
“Since fiscal goals are anchored to growth targets, setting high gross domestic product (GDP) targets amidst external headwinds risks revenue shortfalls,” Mr. Recto said in a forum.
“This would strain our deficit and potentially increase borrowing. But tempering these targets does not diminish our commitment to fiscal consolidation. Instead, it reflects a confident and conservative approach to fiscal policy making,” he added.
The latest data from the Finance department showed that revenue collections jumped by 14.5% to P2.13 trillion in the first half of the year.
For the full year, the government is aiming to generate P4.27 trillion in revenues, including P3.83 trillion in tax revenues.
“The legislative process could also be protracted if new tax laws are required so it is critical to already line up priority tax bills,” Mr. Guinigundo said.
He noted some of the administration’s priority tax measures, such as the Passive Income and Financial Intermediary Taxation Act, value-added tax on digital service providers, and excise tax on single-use plastics.
These measures, along with the mining fiscal regime, the motor vehicle road user’s change, and amendments to the Corporate Recovery and Tax Incentives for Enterprises law and Package 4 of Comprehensive Tax Reform Program, are expected to yield P42 billion in annual revenues, the DoF said earlier.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said that introducing taxes may be a “final resort” by the government.
“Upon exhausting existing tax laws and intensified tax collections, including stricter enforcement such as running after tax cheats, then new taxes and higher taxes would be the final resort, especially if inflation stabilizes further since new taxes and higher taxes could lead to faster inflation,” he said in a Viber message.
Mr. Guinigundo also said the government may need to increase its borrowings, but also ensure effective utilization of the budget.
“Apart from judicious budget utilization, sustainable financing of the increasing fiscal deficit is key to higher economic growth,” he said.
The Department of Budget and Management (DBM) is proposing a 10% increase in next year’s budget to P6.352 trillion.
“The bigger magnitude (of the budget) is no guarantee of any significant gains in economic growth or development,” he said.
“The bottom line is the ability of the Philippine government to make wise use of the budget to establish more critical infrastructure like power, address the fundamental issues in health and education, strengthen the country’s connectivity and digitalization, make headway in promoting rule of law and reducing poverty.
Source: Business World
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