PENDING measures Congress aimed at slashing taxes coupled with bills that, once enacted, would further increase expenditures pose risks to the country’s economic growth, according to the Cabinet-level, interagency Development Budget Coordination Committee (DBCC).
The DBCC said the government could not afford to lose almost half a trillion pesos in combined revenue from tax-reduction measures on top of potential additional budgetary requirements for next year.
“A number of pending revenue measures and expenditure bills in both houses of Congress would have a negative impact on the revenue and budget of the government. Without compensating revenue measures, the estimated revenue losses and budgetary requirements of P369.38 billion to P488.11 billion are equivalent to 2.40 to 3.17 percent of GDP (gross domestic product), posing a risk to the present economic momentum and fiscal stability,” the DBCC said in its fiscal risks statement for 2015-2016 released last week.
Based on the computation of the Department of Finance (DOF), the pending tax-reduction bills filed during the 16th Congress would result into foregone revenue of P23.66 billion to P37.36 billion or 0.15-0.24 percent of the projected 2016 GDP.
The additional budgetary requirements, meanwhile, would likely amount to a bigger P345.72 billion to P450.75 billion or 2.25-2.93 percent of next year’s GDP. This would include a P150-billion capital infusion into the Bangko Sentral ng Pilipinas under the proposed BSP charter amendment bill, the DBCC explained.
In this regard, the DBCC said the tax system “should be reviewed in a holistic and comprehensive manner to ensure that the country has sufficient resources to finance the much needed physical and social infrastructures.”
The DOF has been proposing a comprehensive tax reform package, which was being pitched to legislators as early as late last year, aimed at easing the burden of income taxpayers while also slapping new or higher taxes on consumption.
To ensure that foregone revenues would be compensated for in case legislation aimed at bringing down income tax rates progresses, part of the DOF’s comprehensive tax reform package proposal includes raising excise taxes on oil, vehicles, as well as expanding the VAT to 14 percent from 12 percent at present.
One of the four objectives of the proposed comprehensive tax reform package was enhancing the Bureau of Internal Revenue (BIR) and the Bureau of Customs’ (BOC) administrative capacity to collect taxes.
To do so, the DOF was proposing enhancement of measures against base erosion and profit-sharing by repealing the bank secrecy law for taxation purposes and the inclusion of tax evasion as predicate crime to money laundering, as well as providing for automatic exchange of information.
DOF estimates showed that only about 400,000 of the 1.8 million self-employed in the country pay correct taxes. Self-employed individuals should have been paying P300 billion to P500 billion in taxes each year, but the BIR could only collect P15 billion.
Also proposed by the DOF were enhancements of compliance provisions and strengthening of enforcement measures by increasing fines and penalties; mandatory use of the tax identification number or TIN in transacting with the government; exempting the BIR and the BOC from the Salary Standardization Law; and allowing the two biggest tax-collection agencies to retain a certain percentage of their collections as budget for modernization.