MANILA, Philippines - The International Monetary Fund (IMF) wants the value-added tax raised to 15 percent and the income tax rate slashed to 21 percent under the next administration, according to Finance Undersecretary Gil Beltran.
Beltran said he learned of the IMF position during the institution’s recent meetings in Washington, which he attended.
Raising VAT from the current 12 percent to 15 percent and cutting the income tax from 30 percent to 21 percent were mainly recommendations of University of the Philippines economists. Finance Secretary Margarito Teves has endorsed the recommendations.
“They agreed that it’s a good idea,” Beltran said referring to IMF’s stand on the proposals.
“There will be a small IMF mission to find out the policies of the next administration,” Beltran said. The mission is expected to arrive in July.
He said IMF officials believe that increasing the VAT and reducing the income tax is a feasible and doable policy and has worked in many countries.
Beltran said all presidential candidates should already be gathering their respective economic planners to thresh out their economic plans.
The DOF is still studying the impact on revenue of bigger VAT and smaller income tax.
The government wants a combination that would at least bring in more than P88 billion, which is roughly the same revenue figure achieved when VAT was raised to 12 percent from 10 percent in 2005 through the Reformed Value Added Tax Law.
In 2008, the government was able to raise P121.14 billion from the RVAT law or P32.21 billion higher than the P88.93 billion collected in 2007.
This year’s budget deficit is at P293 billion, slightly narrower than the P298.5 billion deficit incurred last year.