Moody’s keeps close watch on sin tax measure

MANILA, Philippines - Moody’s Investors Service is keeping a close watch on the sin tax measure and the forthcoming discussions at the bicameral conference committee meetings, its lead analyst for the Philippines said.

Christian De Guzman said the global debt watcher would also be monitoring the impact of the sin tax measure on the government’s fiscal sustainability.

 “We would see the actual passage of the bill as positive as it would help to increase the government’s revenues. Relative to other countries with similar ratings, the Philippine government’s revenues are far lower and thus have an adverse impact on key ratios of fiscal sustainability that we monitor,” he said.

Moody’s upgraded its foreign and local currency long-term bond ratings on the Philippines last month to just a notch below investment grade, Ba1 from Ba2.

The global debt watcher cited the country’s better economic performance and the continued fiscal revenue growth despite the deteriorating external demand.

De Guzman said Moody’s would also be closely monitoring the bicameral conference committee meetings.

 “I think it’s also important to note that the dimensions of the sin tax bill post-bicameral conference are as yet unclear,” he said.

In addition, as related receipts will be directed towards healthcare spending, the actual passage of the bill would be neutral for the deficit.

Nevertheless, De Guzman said the actual passage of the sin tax bill bodes well for the government’s efforts to improve revenues.

He also said it would be a concrete example that the 15th Congress has finally enacted a new legislation that would help government finances.

 “The 15th Congress had not achieved any significant developments with regards to revenue previously, while the 14th Congress was characterized by the passage of several revenue eroding measures,” De Guzman said.

The Aquino administration is pushing for a sin tax measure that would translate to additional revenues of P60 billion but the House of Representatives’ version, approved in June, would yield only P31.35 billion in incremental revenues.

The Senate’s version would yield P40 billion. Both versions have yet to be reconciled through the bicameral meetings, which are expected to start within the month.