Palace mulls supplemental budget to fund COVID plan

MANILA, Philippines — Malacañang is “very careful” about asking Congress for a supplemental budget to fund its coronavirus disease 2019 or COVID-19 response efforts due to a lack of additional revenues, according to the Department of Finance (DOF).

Finance Secretary Carlos Dominguez said the government, for now, would have to make do with the P4.1 trillion budget.

“If we ask for a supplemental budget, we have to have supplemental revenue. And we don’t have supplemental revenue,” Dominguez said during a press briefing held after the ceremonial turn over of the Philippine National Police’s P228 million donation to the DOF for COVID-19 response.

“We have been very careful about asking for a supplemental budget because actually, we don’t have supplemental revenue. So we will strive to live within the P4.1 trillion budget this year, and so far we’ve been okay with that. It’s been difficult because we have to reallocate from past priorities to new priorities, but that’s the reality of the situation,” he said.

Based on the estimates of the Development Budget Coordination Committee (DBCC), the pandemic is expected to cut revenues by as much as P286.4 billion if economic growth settles at zero percent this year. If the economy contracts by one percent, the drop in revenues could reach P318.9 billion.

Preliminary data from the DOF showed that the combined collections of the Bureau of Internal Revenue (BIR) and Bureau of Customs (BOC) amounted to only P641.62 billion from Jan. 1 to April 17, more than 26 percent lower than the P871.19 billion in the same period last year.

The amount was also P431.45 billion or 40 percent short of the combined target of P1.073 trillion for the period.

The decline was attributed to the implementation of the enhanced community quarantine in Luzon and other parts of the country as well as the extension of the deadline for the filing and payment of annual income taxes.

Still, Dominguez said collections could still recover as revenues were not lost due to the deadline extension, but merely postponed.

“So we should still have a hefty collection. That will still be hefty. That is only postponed,” he said.

On the other hand, Dominguez said value-added tax (VAT) and excise tax collections have suffered due to the restrictions placed on the manufacturing and sale of cigarette and alcohol products as well as lower demand for other sin products.

“That’s really bad. Like for instance, there is no manufacturing for domestic cigarettes, only for export. We are losing around P14 billion a month from cigarette manufacturing alone. So that one is down. The excise tax on alcohol is also down,” he said.

“It is quite serious and of course, demand has been very low. So we also have very low VAT collection. We also have relatively weak collection on sugary drinks tax,” Dominguez said.

The finance chief said the government would review the projected expenses of the Philippine Health Insurance Corp. and come up with solutions on how to fund its requirements for the Universal Health Care program amid the decline in excise tax collections.

Due to the expected drop in revenues brought about by the pandemic, the DOF estimates that the country’s fiscal deficit may widen to as much as 5.3 percent of gross domestic product (GDP) this year.

Dominguez said the government is prepared to increase its borrowings to plug the budget shortfall and to sustain measures in response to COVID-19.

He said the government continues to negotiate with multilateral agencies for possible financing packages.

In addition, the finance chief said the Philippines is in early stages of negotiation with its bilateral partners, including Japan, South Korea, China and France, for possible COVID-19 financing.

“In fact, there’s also some bilateral financing available from France, I think around $200 million or $300 million,” he said.