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MANILA — The government will likely rely on administrative measures aimed at making tax collection more efficient to boost revenues rather than create new taxes that could hurt the Marcos administration’s popularity, Moody’s Investors Service said.
In a commentary, the global debt watcher said the Philippines and India were unlikely to resort to “unpopular” tax measures to narrow their fiscal deficits as the two nations head to electoral polls over the next months.
Instead, Moody’s said these countries are expected to take advantage of the pandemic-led digitalization boom to increase tax collection efficiency and plug revenue leakages.
READ: Show roadmap for digital taxation, Gatchalian urges BIR
“India and the Philippines will continue to leverage gains in digitalization from the pandemic to increase revenue through stricter tax compliance and other administrative measures, without a significant broadening of the tax base that could prove politically unpopular,” Moody’s said.
Newly appointed Finance Secretary Ralph Recto said he would push for the immediate passage of key tax reforms to be certified as urgent measures by President Marcos. These pieces of legislation, he said, would “not only finance development but will reduce deficit and our dependency on debt.”
Tax reforms
Recto, a veteran lawmaker who co-authored the 1997 Tax Reform Act and the unpopular Expanded Value-Added Tax (VAT) law, said his main priority would be to raise P4.3 trillion in revenues this year. But lawmakers over the weekend cautioned the newly installed finance chief against collecting new taxes that may burden Filipinos.
To recall, the Department of Finance (DOF) under Recto’s predecessor, Benjamin Diokno, had wanted the President to press Congress to hasten the approval of new tax measures such as Package 4 of the Comprehensive Tax Reform Program; the Value Added Tax on Digital Service Providers; Excise Tax on Single-Use Plastic Bags; and Excise Tax on Sweetened Beverages and Junk Food.
READ: DOF banks on new taxes to hit 2024 revenue goal
The DOF was also pushing for the passage of Package 3 or the Real Property Valuation and Assessment Reform, and the VAT refund for foreign tourists.
These revenue measures are still in the legislative mill over a year since Mr. Marcos won the presidency as his administration prioritized the legislation creating the Maharlika Fund, which received presidential certification for urgent passage.
Based on latest government forecasts, it is only in 2027 that the budget deficit, as a share of the economy, is expected to return to prepandemic level at 3.2 percent. By the end of Marcos’ term in 2028, the deficit-to-gross domestic product (GDP) ratio is predicted to narrow to 3.0 percent.
The anticipated implementation of priority tax measures over the medium term will push up revenues to P6.622 trillion in 2028 and help cut the deficit, economic officials said.
Zooming out, Moody’s said more than half of the countries in Asia-Pacific were expected to see an increase in general government debt, as a share of GDP, in 2024, in contrast to broadly stable or slightly declining debt burdens globally.
“Debt burdens will reach, or remain close to, historical peaks in 2024, undermining the ability of many governments to provide material fiscal support in the event of future shocks,” the credit rating agency said. INQ