More bitter pills ahead

Set to mark the first year into office of President Ferdinand “Bongbong” Marcos Jr. (PBBM) this Friday, the administration’s economic team has been deep into finalizing various proposed bills that need approval of the 19th Congress. Led by Department of Finance (DOF) Secretary Benjamin Diokno, the President’s economic team listed several priority bills that PBBM will submit in his next state of the nation address (SONA). The socio-economic bills also consist of legislative proposals aimed at not only to raise but also to plug the revenue leakages in taxes through structural reform measures.

Naturally, the number one item in the SONA is the desired speedy approval of the proposed P5.768 trillion budget for 2024.

The President’s SONA caps the ceremonial joint opening sessions of both chambers of Congress set on July 24 at the Batasan Pambansa in Quezon City. Before that though, the President is likely to convene the Legislative-Executive Development Advisory Council (LEDAC) for the adoption of common legislative agenda. The first regular sessions of the 19th Congress have so far delivered a number of the so-called “priority bills” that PBBM certified as urgent administration measures.

Since he took office, PBBM had signed into law a few of them. Just to name some, it included the 2023 budget law; amendment to SIM Registration; the resetting of the elections for the barangay and Sangguniang Kabataan; and the amendments to the fixed tenure of the Armed Forces chief of staff and major service commanders.

Coming soon is the enrolled copy of the hastily approved Maharlika Investment Fund (MIF) that got through the Senate at the last minutes before the 19th Congress adjourned sine die. Quite a number of the other bills in the list of common legislative agenda remain pending in various stages of the legislative mills. The most controversial one is the proposed military, police uniformed personnel (MUP) pension reform bill still at the technical working group of both chambers of Congress.

“All these things we’re doing, the MIF, the MUP are really to increase the fiscal space so we can fund our health, education, food security programs,” Diokno pointed out.

For the second regular sessions of Congress, Diokno disclosed at least four new tax reform measures will be introduced. Obviously, for the same reasons cited, to raise additional revenues to include funding for PBBM’s pet programs. In an exclusive briefing with selected editors over the weekend, Diokno bared the four revenue-raising measures included the “sweet” tax; the proposed tax on “salty” food products; the tax on “single use plastics;” and the tax on digital (online merchandising).

“We’re doing all of these things, reforms before the mid-term elections (in May, 2025),” Diokno cited.

The Finance Secretary acknowledged the usual push back against new taxes, especially for lawmakers who are up for re-election in office. This is why, he explained, the Philippine government has sought the assistance of the International Monetary Fund (IMF) to review the present value added tax (VAT) system in our country to address the “leakages” in collections.

“Our VAT is not yielding the right amount of money,” Diokno conceded.

In his latest economic report, Diokno noted the budget deficit eased 17 percent to P122.2 billion in May. Year-to-date, the budget gap – or the difference between collections as against expenditures – shrunk almost 30 percent to P326 billion.

This simply showed the government collected more revenues from both tax and non-tax sources. Diokno admitted the expenditures barely moved because there has been “under spending” of many government agencies. For whatever reasons, budget allocated must be spent for intended purposes. If not, certain public needs or services are not being met and satisfied.

“Use it or lose it.” This has been the standing policy that Diokno left behind when he was the DBM Secretary during the administration of former President Rodrigo Duterte. If not used as budgeted, the funds go back to the National Treasury. Diokno imposed this policy of “use it or lose it” to stop the practice by the government agencies when the unused funds were being turned into “savings” and then re-aligned to expenditures for other activities or projects.

The Development Budget Coordinating Committee (DBCC) earlier announced the Marcos administration is aiming to borrow as much as P2.46 trillion for 2024, or an 11 percent increase from this year’s level. According to the latest record of the Bureau of the Treasury, the country’s outstanding domestic and foreign debts stood at P13.9 trillion as of end-April. This was P54.24 billion more than previous month’s total. The increase was largely attributed to the weakening of the peso against the mighty US dollar.

Just last Monday, Diokno signed four new loan agreements in behalf of the Philippines from the World Bank (WB). Totaling $1.14 billion, Diokno cited these loans will finance initiatives of the Marcos administration to strengthen the country’s climate resilience, agricultural productivity, and quality of education.

Based from the official statement released after the signing with WB representative in Manila, the breakdown of the loan deals are as follows: $750 million is from the Philippines First Sustainable Recovery Development Policy Loan; $276 million for the Bureau of Fisheries and Aquatic Resources’ Mindanao Inclusive Agriculture Development Project and the Philippine Fisheries and Coastal Resiliency Project; and, $110 million for the Department of Education’s Teacher Effectiveness and Competencies Enhancement Project in kindergarten to Grade 6 in the Zamboanga Peninsula, Soccsksargen, and Bangsamoro Autonomous Region in Muslim Mindanao.

The DOF did not mention though the loan details on interest rate and terms of payment. But usually these are concessional loans with payment period that could stretch up to 20 years, with grace period.

Like a typical household, borrowing is the course of action if you spend more than the income earned. For the government, imposing taxes are the bitter pills to take.