MANILA – The Department of Finance (DOF) has prepared a proposed fiscal consolidation program for the new administration, citing the need to raise revenue to pay for pandemic-related expenses from 2023 and support economic growth.
In a Wednesday briefing, Finance Secretary Carlos G. Dominguez III said the proposed fiscal consolidation and resource mobilization plan aims to help the new administration “get started and build on the momentum created by the Duterte administration over the past six years”. .”
According to the proposal, the government should increase revenue, improve tax administration and reduce wasteful spending through tax reforms.
It comprises three packages, the first of which is to be implemented in 2023 and the following two are to be implemented over the next two years.
Among the proposals in the first package are a three-year deferral of the personal income tax cut under the Tax Reform for Acceleration and Inclusion (TRAIN) Act from 2023, broadening of the value added tax (VAT) base and possible reduction of the VAT rate, repeal of the immediate expenditure of input VAT on capital goods, imposition of VAT on Digital Service Providers, Motor Vehicle Use Tax (MVUC) reform, repeal of excise tax exemption on vans and imposition of excise tax on motorcycles, and the rationalization of the mining tax regime.
The first package is expected to generate an average annual revenue impact of PHP 247.8 billion.
The second package is expected to have an average annual revenue impact of PHP 126.8 billion, while the projected revenue impact of the third package is yet to be determined.
Dominguez said the proposals are part of “the department’s obligation to the Filipino people and the new administration to help resolve the long-term financial issues brought about by the Covid-19 pandemic as well as the current crisis in Ukraine.” .
He said the proposed measures are “fair, effective and remedial”.
“The plan is achievable and is designed to secure the gains we have made under the Duterte administration and to ensure the government can continue to make economic investments and pursue stimulus programs, maintain its high credit ratings, pull itself out more quickly of its debt. , and protect the Philippine economy from future external shocks,” he said.
He explained that “failure to pursue a program of fiscal consolidation and resource mobilization could likely have serious and growing consequences on our financial and economic health.”
He said financial authorities “are optimistic that the new administration and our next group of lawmakers will recognize the importance and urgency of these measures and implement them as soon as possible.”
“The next administration comes with a strong mandate. We are confident that the future president will put it to good use by pursuing essential reforms such as this much-needed program,” he said.
During the same briefing, the officer in charge of the DOF, Undersecretary Valery Brion, said having the funding to pay pandemic-related loans was necessary for the economy to maintain its credit rating. .
Quoting the Bureau of the Treasury (BTr), she said the government needed to raise at least PHP249 billion a year so as not to resort to additional borrowing to pay off its pandemic-related debt of PHP3.2 trillion.
She said another option is to cut productive spending by an equivalent amount, but stressed that this would jeopardize the recovery of the economy, as there is a need to maintain spending on infrastructure, education , health care and other socio-economic programs essential to ensure inclusion. growth.
She said cutting public spending by PHP 249 billion is equivalent to not building 143,876 classrooms in public schools, 8,174 kilometers of paved roads and free irrigation of 609,645 hectares of land, among others.
“Our best option is to expand fiscal space through new taxes and improve tax administration and enforcement,” she added. (NAP)