DOF: No new, higher taxes in remainder of Duterte’s term
MANILA, Philippines—There would be no new, or higher, taxes in the remainder of President Rodrigo Duterte’s term, which will end in 2022, the Department of Finance (DOF) announced on Tuesday (June 15).
It would be up to the next president to slap new or higher taxes while the economy rebounds from pandemic-induced recession which raised the amount of debt for COVID-19 response, the DOF said.
Finance Undersecretary Gil Beltran, DOF chief economist, told the Economic Journalists’ Association of the Philippines’ midyear forum that the DOF was currently listing possible tax measures for the next administration to consider.
The Aquino administration, through former finance chief Cesar Purisima, in mid-2016 turned over to Finance Secretary Carlos Dominguez III the DOF’s proposals.
This allowed the Duterte administration to come up with its comprehensive tax reform program in a matter of months.
Purisima’s proposal included lower personal income tax rates, which the Duterte administration packaged with higher or new tax sources to offset foregone revenues and became what we know now as the Tax Reform for Acceleration and Inclusion (TRAIN) Act.
While he did not disclose the specific tax measures which the DOF may recommend to the next administration, Beltran said the department would likely cover “relatively untaxed sectors” like digital transactions.
Beltran said the DOF was also looking at carbon tax and a levy on cryptocurrencies should the Bangko Sentral ng Pilipinas (BSP) recognized it as an asset.
Last February, the DOF said it was carefully studying carbon taxation “to ensure that there’s no regressivity within the system” while slapping a price on harmful emissions in line with the country’s push to fight climate change.
International Monetary Fund (IMF) estimates last March showed higher carbon taxes of up to $75 per ton would allow the Philippines to slash carbon dioxide (CO2) emissions close to its commitment to the global Paris Agreement on climate change.
The IMF had said implementing a $25-per-ton carbon tax would cut emissions by about 15 percent, while a bigger levy of $50 would reduce CO2 emissions by almost 25 percent.
With a carbon tax of $75 per ton, the Philippines could lessen emissions by as much as 30 percent — near the country’s updated 2020 pledge to lower CO2 emissions by about 35 percent, the IMF had said.
Beltran said the Philippines’ tax regime mandated subjecting all transactions to VAT while also collecting from all taxable income.
Dominguez earlier said that due to the harder times wrought by the COVID-19 pandemic, the government will not impose any new tax up to the time Duterte steps down in mid-2022.
To raise revenues amid pandemic-battered collections and repay ballooning debt in the near term, the government was instead looking to sell a couple of mining assets plus the commercial functions of state-run Philippine Amusement and Gaming Corp. (Pagcor) as well as Philippine Charity Sweepstakes Office (PCSO).
Beltran nonetheless said the government had temporarily shelved plans to privatize Pagcor and PCSO as these coughed up dividends which funded the fight against the health and socioeconomic catastrophe inflicted by COVID-19.
Dominguez said the Philippines’ debt-to-gross domestic product (GDP) ratio–a metric which credit-rating agencies watched as this reflected an economy’s capacity to settle obligations—will further rise to 58.7 percent by yearend from 54.6 percent in 2020 and the record-low 39.6 percent in 2019.
As of end-April, the national government’s outstanding debt hit a new high of P10.99 billion.
During the first quarter, the debt ratio hit a 16-year high of 60.4 percent, already breaching what debt watchers considered as the manageable public debt threshold of 60 percent, as an impact of the prolonged recession which spilled over to the first quarter of 2021.
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