Government firm on fiscal deficit targets

MANILA, Philippines — The Department of Finance (DOF) is willing to listen to suggestions on the tax reform program as long as the ideas will not affect the country’s fiscal deficit ceiling.

During the Economic Journalists Association of the Philippines (EJAP) Economic Forum in Manila, Finance Secretary Carlos Dominguez said the DOF is open to inputs from other sectors when it comes to the Comprehensive Tax Reform Program (CTRP).

“In a democracy, many people have different ideas, so we must listen to all the different ideas out there,” Dominguez said.

However, Dominguez said the government would not put the economy at risk by allowing the deficit to exceed three percent of gross domestic product (GDP.)

Budget Secretary Benjamin Diokno  said economic managers are “committed to keep the deficit at around three percent of GDP.”

“We won’t allow the deficit to increase further to four percent,” he said.

The budget chief said economic managers are not willing to compromise the public sector deficit to implement the Supreme Court’s ruling on the internal revenue allotments of local government units (LGUs).

He said if it comes to that, the government may lower the IRA allocation of LGUs to 30 percent of all national taxes from the current 40 percent.

“On the IRA, our response is that there is a provision in the Local Government Code that in the event of an unmanageable public sector, the President has the option to reduce IRA from 40 percent to 30 percent so we’ll use that,” Diokno said.

For 2018, the Development Budget Coordination Committee (DBCC) set the government’s fiscal deficit ceiling at three percent of GDP. This is programmed to increase to 3.2 percent of GDP in 2019.

Meanwhile, both Dominguez and Diokno agreed that the remaining packages of the CTRP need to be passed within the year.

“We are just being realistic. If we go beyond Dec. 31, we hope for another round and that’s about maybe July next year. But then we will start from page one, so  our target is to have all the tax measures passed before the end of the year,” Diokno said.

Dominguez also warned that if the government fails to modernize its tax policy this year, along with addressing gaps in infrastructure, the Philippines may not become a “dynamic and inclusive” economy.