No more new tax measures – Palace

MANILA, Philippines - The government is focused on improving its revenue collection and is not eyeing new tax measures, Malacañang clarified yesterday.

Presidential Communications Operations Office Secretary Herminio Coloma said that while the government acknowledges the need for more funds for better delivery of services, “a big-picture approach is essential so as not to lose focus on the importance of sustaining economic growth and consolidating the gains of good governance and sound economic management.”

“Taxes are the lifeblood of the economy as these are used to fund the national budget for infrastructure, public services and investments in people,” he said. “Government expenditures constitute a significant portion of the country’s gross domestic product, and these are funded significantly by taxes paid by our people,” he added.

Bureau of Internal Revenue (BIR) chief Kim Henares also said no new taxes are being readied.

“We are for status quo: no change in tax rates and no new or higher taxes, and also no income tax cuts. Government will just focus on improving collection,” Henares said.

There are proposals in the House of Representatives to lower income taxes but the Department of Finance and the BIR explained the tax cut – if approved – would require a measure to offset the losses in collections. One of the measures reportedly being considered is raising the Value-Added Tax. Henares stressed the “government is not proposing higher VAT rates” from 12 to 14 percent. Several lawmakers have voiced opposition to new tax measures.

Henares also pointed out the government is still in a deficit situation as total tax revenues are still not enough to fund the entire national budget.

She said lowering tax rates would mean less budget for projects for addressing hunger and poverty and for providing quality education to greater number of Filipinos.

With lower-than-desired revenue, the government would run the risk of losing its investment grade rating.

“We will slide back to the regime of double-digit interest rates. That means whatever additional money you will get for lower tax rates, you will have to pay for higher interest for housing and car loans,” Henares said.

“Houses and cars which have become affordable today because of lower interest rates will become unaffordable,” she said.

“Our legislators should help government to be able to collect more efficiently by removing bank secrecy for tax purposes and making tax evasion a predicate crime,” she pointed out.

“If we are able to make those who do not pay taxes at all because they can hide their money become more responsible citizens, we will be able to realistically look at lowering tax rates without fear of not being able to collect enough to provide the necessary services to the public,” she said.

Finance Secretary Cesar Purisima earlier said there must be a holistic review of the tax structure so as not to put the country’s fiscal gains and fiscal health at risk.

Last year, the DOF explained that while there was a need for a review of the Philippines’ tax system, lawmakers must be made aware that reducing the individual income tax rates might cause the government to lose revenues totaling P30 billion in a year or 0.3 percent to as much as 1.5 percent of the country’s gross domestic product.

While Congress is working for the passage of the tax reform bill, the DOF said it should also consider legislating measures to offset revenue losses.

Purisima earlier said a “piecemeal” approach could be disruptive but expressed hope the entire tax structure would be more equitable, progressive and competitive while generating more revenues.

“It is like a building. You cannot just tweak one part or else the whole thing will collapse. It's the same with taxation,” Purisima was quoted as saying as the World Bank called for the Philippine government to raise tax revenues by broadening the base and making the tax system simpler and more efficient, while lowering certain tax rates.

Encroachment

With regard to House Resolution No. 10 filed by House Speaker Feliciano Belmonte Jr., Coloma said the executive department would respect the sentiments of the lawmakers on the budget process.

Belmonte said the resolution he filed aims to protect Congress’ budget from scrutiny by the Department of Budget and Management. It has already been approved on second reading and is up for plenary debates.

Coloma said the Palace is in constant dialogue with leaders of Congress regarding ways to improve the implementation of the national budget.

In the resolution, Belmonte said the Senate and the House of Representatives should have full autonomy in determining the appropriations required for their operations.

The present budgetary policies formulated by the executive, through the DBM, the resolution stated,“threaten” the independence of Congress as well as “encroach on its exclusive domain and violate the principle of separation of powers, upon which the entire fabric of our constitutional system is based.”

Authors of the resolution said lawmakers’ budgets should not be subject to scrutiny, alterations and control of the DBM, and that Malacañang should make impositions only on agencies under the executive branch.

“The amount of appropriations as proposed and determined by the Senate and the House shall be included in the annual budget of the national government without reduction, alteration or modification,” the resolution said.

The proposed 2016 budget for the 292-member House amounted to P7.99 billion from P8.54 billion in 2015 while the 24-member Senate proposed P3.65 billion from P3.61 billion in 2015.

No to VAT hike

Apparently still unaware of the Palace’s clarification, Belmonte said he is against any proposal by the administration to increase VAT from 12 percent to 14 percent.

“I am against this proposal for the reason that it would harm the working class and their old-age savings,” he said in a text message to reporters.

“While VAT is really high in some other countries, the idea of adopting this scheme (here) is not good because everybody is expected to be affected,” he said.

Eastern Samar Rep. Ben Evardone urged the DOF to subject the higher VAT proposal to further study.

“The country will face negative impact from this proposal because VAT affects people directly. This should be restudied,” he said.

Lawmakers suspected the reported VAT measure was part of a comprehensive tax reform package prepared by the DOF as foil to lower income tax proposal of Marikina Rep. Miro Quimbo, House ways and means committee chairman; and his Senate counterpart, Juan Edgardo Angara.

Quimbo and his committee are considering several other revenue recovery measures, including the imposition of a soft drinks tax.

But the DOF-proposed and administration-backed higher VAT is not among these measures.

More House members are expressing opposition to increasing VAT to 14 percent.

On Friday, Representatives Rodolfo Albano III of Isabela and Roman Romulo of Pasig City joined scores of colleagues in opposing it. Paolo Romero