Economic team OKs 4-pt program

The Arroyo administration has finally approved the four-point program that ties up its economic and legislative reform agenda and includes painful but critical tax measures.

If implemented in full, the program is expected to generate P100 billion on the first year, barely enough to meet the incremental funding requirements of the government.

The economic team met with President Arroyo at Malacañang yesterday to decide once and for all whether to proceed with the economic program drafted by the Development Budget Coordinating Committee (DBCC).

Finance Secretary Juanita Amatong told reporters after the meeting that the president has given the "go signal" on the four-point agenda that prioritized the administration’s macro-economic and fiscal program, power sector reforms, banking and financial reforms and infrastructure and investments program.

Amatong said the program includes all the proposed tax measures, but the administration has not narrowed it down to an actual list of priority bills that would be presented before Congress as urgent measures.

According to Amatong, the DBCC has not fully studied all the proposed measures, including the controversial proposal to shift from net to gross income taxation.

"Suffice it to say that nothing has been ruled out, that’s as much as I can say," Amatong said. "This includes the GIT, the proposed increase in the value added tax rate and even other measures that have not been ruled out."

According to Finance Undersecretary Eric O. Recto, the list of proposed legislative measures has not been narrowed down to any minimum, adding that all the proposed measures have been given the "go ahead" and would be pursued in varying degrees.

However, Recto said there would not be an omnibus tax measure that would contain all these reforms. "If we do it that way, every single section in that proposed law will be a point of contention and the whole thing might not pass," he said. "It will make more sense to pursue each measure on its own merits."

According to Recto, the president’s marching order was basically "proceed and continue with what you’re doing."

This go-signal formally opens the channel between the legislative and executive departments as the Arroyo administration pushes for the tax reform measures intended to increase its revenues.

Amatong explained that while there is a need to improve tax administration, the increase in revenues from such an effort would still not be enough to address the funding requirement.

"Even under ideal conditions, the amount we will get will not be enough, we need new tax measures," Amatong said.

For this year, the Arroyo administration had made the commitment to reduce its deficit to P197 billion from P202 billion in 2003. The deficit was programmed to go down further to P184.5 billion by 2005.

This means, however, that revenues would have to increase from the P596.4-billion target in 2004 to as much as P717 billion next year, about P121 billion more than this year’s projected revenues.

The need to raise over P100 billion more in revenues, however, would extend beyond 2005 if the Arroyo administration is to stay on track of its plan to balance the budget by 2009. The bulk of these additional revenues would have to come from new taxes that Congress has yet to legislate.