PH tax regime due for overhaul, says IMF
THE PHILIPPINE government will have to overhaul the country’s tax regime to enable it to make much-needed investments in infrastructure and social services, the International Monetary Fund (IMF) said.
Fiscal authorities and Congress should work together to ensure that changes in the country’s tax regime would result in higher collections for the state.
“We need more investments in infrastructure and social services. In the medium-term, revenues have to be increased,” said Chikahisa Sumi, head of an IMF mission in Manila this week.
Officials of the multilateral lender, who are in Manila this week for the Fund’s annual Article IV visit, expressed their support for a package of reforms that would improve the state’s finances.
This includes a comprehensive reform of the country’s tax code, as proposed by the Department of Finance. The IMF also cited the rationalization of tax perks enjoyed by big corporations currently being reviewed by lawmakers.
Sumi said deposit secrecy laws should also be relaxed to allow fiscal authorities to look into people’s bank accounts for evidence of tax evasion. Proposals to lower income tax rates for salary earners and corporations may also be allowed, but only if other measures such as higher consumption taxes are passed.
“We prefer lower rates but a broader base.… Measures should be revenue positive or, at the very least, neutral,” Sumi said.
More stable revenues will ensure that the government has the money it needs to cement recent economic gains.
After last year’s “very weak” budget implementation, the IMF expects government spending to recover this year, with expensive projects running up the state deficit to P283.69 billion, or the equivalent of 2 percent of gross domestic product (GDP).
The IMF expects the Philippine economy to grow by 6.7 percent this year, sticking to a forecast it made earlier this year.
Shanaka Jayaneth Peiris, the IMF’s resident representative in Manila, said this projection would be changed later this week after the government’s release of first quarter GDP data.
The forecast falls short of the Philippine government’s growth target of 7 to 8 percent for 2015.
“Philippine economic conditions have been very good, but this is certainly not the best you can do. The Philippines can do so much better,” Sumi said.
