Admin reiterates stand vs new taxes

MANILA, Philippines - The Aquino administration reiterated that it has no plans to push new tax measures despite pressures from economists as the governmment intends to focus on further improving its collection efficiency.

Finance Secretary Cesar Purisima said the government would address the loopholes in the implementation of existing tax measures to further improve collection before asking Congress to pass new tax measures.

“Obviously and politically that is not feasible at this point until we do our part of the bargain which is the promise of the President that we fix the holes first in the system and that is what we are focusing on and I believe that we have initial successes and hopefully we hit a tipping point at some point so that the gains will be more substantial than what we have seen,” Purisima stressed.

Fiscal authorities are focusing on further improving tax collections and controlling spending as it intends to trim the budget deficit to two percent of gross domestic product (GDP) starting 2013 until the end of the term of President Aquino in 2016.

The Philippines managed to trim the budget deficit but reached a new record level of P310 billion or 3.6 percent of GDP last year from P298.5 billion or 3.9 percent of GDP in 2009.

Purisima pointed out the Aquino administration is not in a hurry to achieve a balanced budget and does not intend to take shortcuts by raising and implementing new tax measures.

“I always would like to tell my friends that it took us a long long time to dig ourselves in the hole we are in so we should not be in a hurry to fill in that hole because we might find ourselves buried in that hole. In public finance, a program need not only be technically correct, it need not only be implementable in practice but it must also be politically feasible,” he added.

The country’s fiscal consolidation plan under the term of former President and now Pampanga Rep. Arroyo anchored on the increase in the value added tax (VAT) rate was derailed by the global financial crisis. The plan was aimed at accelerating the achievement of a balanced budget by 2008 instead of the original 2010 schedule under the Medium Term Philippine Development Plan (MTPDP).

The global financial crisis prompted the then Arroyo government to abandon the plan but fiscal authorities managed to trim the budget deficit to P12.4 billion or 0.9 percent of GDP in 2007. The shortfall increased steadily to P68.1 billion in 2008 to P298.5 billion in 2009 and finally to a record P310 billion last year.

Former Socioeconomic Planning secretary Felipe Medalla said the government’s fiscal consolidation plan aimed at raising the tax effort or collections of the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC) could not be achieved without the implementation of new tax measures.

The economist said the government could not raise its tax to GDP ratio by four percent to five percent without the imposition of new tax measures.

“I have done a few number crunching and the main cause in the decline in revenue is of course that we cut tarriff which we should. These are so huge that I dont think even honest governance can make up for it,” Medalla added.