Now, Recto wants to cut income taxes

Sen. Ralph Recto. INQUIRER FILE PHOTO

MANILA, Philippines—With the Philippines getting an investment grade status for the first time in its history, “Mister e-VAT” thinks that the Aquino administration can now afford to reduce the taxes paid by fixed wage earners as a reward for their contribution to improving the government’s fiscal picture.

Sen. Ralph Recto, the main proponent of the Expanded Value Added Tax Law in 2005, said taxpayers had contributed between P1 trillion and P1.5 trillion in additional taxes such as the e-VAT, rationalization of automobile taxes and increase in sin taxes, over the last eight years which allowed the government to pare down its budget deficit.

The lower deficit, coupled with robust economic growth, has prompted credit rating agency, Fitch, to raise the Philippines to investment grade status.

“I feel good about it (investment grade rating). But the real heroes are the taxpayers who contributed to improving the fiscal health of the nation. We are now in a better position to spend more on health, education, infrastructure and other socioeconomic services. It will be easier to attract investments and create jobs with lower interest rates,” said Recto.

Not now, Ralph

However, Budget Secretary Florencio Abad Jr. did not agree with Recto’s proposal.

“It’s not the time to do it. On the contrary, our problem is how we can broaden the tax base and dramatically improve our revenue effort. We cannot continue to expand our public investments if we don’t improve revenue generation,” said Abad.

Recto, who lost his reelection bid in 2007 due to a backlash from voters from his sponsorship of the e-VAT law, said he would push for the lowering of taxes in the next Congress. He won a new six-year term in 2010.

“We must show taxpayers that there is light at the end of the tunnel. We may reduce taxes if we consolidate our national government balance sheet by incorporating Pagcor (Philippine Amusement and Gaming Corp.), PCSO (Philippine Charity Sweepstakes Office), royalties from Malampaya, income from the coconut levy income, and improvements in operations and income of GOCCS (government owned and controlled corporations),” said Recto.

But Finance Secretary Cesar Purisima said it was still premature to think about cutting back on taxes. “We are only at 12.8 percent to GDP (gross domestic product) in our tax efforts. We need to reach first 16 percent by 2016,” said Purisima.