MERELY boosting tax collection efforts and enforcing tax laws may not yield sufficient revenue for the government, a former Philippine central bank official said.
“With the persistent issues in governance, the old formula of intensifying tax collection and ensuring compliance with tax laws may not deliver sufficient revenues,” former Bangko Sentral ng Pilipinas (BSP) deputy governor Diwa Guinigundo said.
“The legislative process could also be protracted if new tax laws are required so it’s critical to already line up priority tax bills,” he added.
In addition to prudent budget management, securing sustainable financing for the growing fiscal deficit is crucial for achieving higher economic growth.
Finance Secretary Ralph Recto has been firm on not imposing new tax measures, saying the government will instead focus on improving revenue collections to help fund its spending needs.
He stated that previous tax proposals will still be pursued but several have to be reviewed and amended with a view to making rates “fairer” and easier to collect.
Some of the tax measures that the Finance department wants Congress to pass are the Real Property Valuation and Assessment Reform measure, a value-added tax (VAT) on digital service providers, a VAT refund for nonresident tourists, and the proposed Passive Income and Financial Intermediaries Taxation Act.
During the EJAP-SMC Economic Forum on Monday, Recto asserted that the government is on track to meet its revenue target for this year, with collections reaching nearly half of the goal in the first six months.
As of the first half of 2024, the government has already collected P2.13 trillion in revenues. This is 14.6 percent higher than last year’s P1.9 trillion
However, Guinigundo expressed concern on heavily relying on ramping up tax collection to cover the deficit.
“This course may have its natural limits and sooner or later, additional or higher tax rates may be inevitable. Short of what is required, the government may also have to increase its borrowings,” he added.
The former BSP official cited that tax effort stood at only 14.1 percent last year, slightly lower than the 14.6 percent recorded in 2022.
In the first quarter of the year, the tax effort ratio was only 13.4 percent. Meanwhile, public debt surged from P7.7 trillion before the pandemic in 2019 to P14.6 trillion in 2023, representing an increase from 39.6 percent to 60.1 percent of gross domestic product.
He emphasized that simply having a larger budget does not ensure substantial gains in economic growth or development.
“The bottom line is the ability of the Philippine government to make wise use of the budget to establish more critical infrastructure like power, address the fundamental issues in health and education, strengthen the country’s connectivity and digitalization, make headway in promoting rule of law and reducing poverty,” Guinigundo said.
Be the first to comment