No new tax bills

Lives and livelihood of the Filipino people are the primary considerations of President Rodrigo Duterte in the government’s decision to keep the entire country under quarantine, Malacanang has repeatedly declared. Like a mantra, Malacanang invokes medical science and economic data as largely the parameters that define the community quarantine guidelines being implemented by the government.

Thus, while there is no vaccine yet against the deadly 2019 coronavirus disease (C-19), the Inter-Agency Task Force on the Management of Emerging and Infectious Diseases (IATF-MEID) conducts a regular 14-day review of the quarantine guidelines to contain the spread in our country of the C-19 pandemic. The IATF is again set to calibrate anew the next round of community quarantines depending on the severity of C-19 infection cases in Metro Manila and other parts of the country lapsing by end of this month.

Data from the medical science comes from the Department of Health (DOH) headed by Secretary Francisco Duque Jr. as co-chairman of the IATF. But when it comes to the economic data, President Duterte relies much from his key economic advisers led by Department of Finance (DOF) Secretary Carlos “Sonny” Dominguez and Department of Trade and Industry (DTI) Secretary Ramon “Mon” Lopez. Dominguez, a former Ateneo de Davao City High School classmate of the President, and Lopez both sit as members of the IATF.

“By allowing science to lead our response, we managed to save thousands of Filipino lives that could have been lost if the government did not act swiftly,” Dominguez cited. “Our recent economic indicators show the trade-offs from President Duterte’s decisive actions to put primacy on protecting our people,” he noted.

However, he conceded, it came with heavy costs as shown by the country’s economic growth indicators on the serious consequences of the lockdowns for the past three months now.

In the first quarter of this year, the Finance chief pointed out, the Philippine economy shrank by two-tenths of one percent for the first time in over two decades. The country’s unemployment rate reached 17 percent. “Our revenue intake dropped significantly due to the strict quarantine measures that slowed down economic activity,” he rued.

As of end of May this year, the Bureau of Treasury – an attached agency of the DOF – reported the budget deficit of the government amounted to P202.1 billion compared to the P2.6 billion surplus recorded in May last year. Deficit is the difference of tax and non-tax revenues collected as against spending by the national government for the period.

The economic impact of budget deficit spending is measured in terms of the country’s gross domestic product (GDP) for the same period. “Our deficit-to-GDP ratio will more than double as tax collections are down and as the government spends more to beef up our healthcare system and provide relief to families, workers and other sectors hardest hit by the pandemic,” Dominguez explained.

Dominguez underscored these points in our Kapihan sa Manila Bay virtual news forum via Webinar last Wednesday. A few hours later that day, the International Monetary Fund (IMF) officially released its report on its World Economic Outlook update showing the Philippine economy is projected to further contract this year due to the global economic disruptions caused by the C-19 pandemic. The IMF expects the GDP of the Philippines in particular to likely shrink by as much as 3.6 percent for this year. The IMF revised its forecast that downgraded by 4.2 percentage points its earlier projection of 0.6 percent growth of the Philippine economy.

Speaking for the Duterte economic team, both Dominguez and Lopez assuaged the Filipino people that the country’s strong macro-economic fundamentals will remain resilient to cope with the severe impact of the C-19 pandemic.

“Fortunately, the President’s judicious economic management and reform agenda since he took over in 2016 has put the government in a strong financial position ahead of the global health crisis,” Dominguez pointed out. When the pandemic struck, he recalled, the debt-to-GDP ratio of the Philippines posted a “historic low” of 39.6 percent. This he credited to the “bold tax reforms” by the Duterte administration,

Dominguez noted the government revenue collections increased by 16.1 percent of GDP in 2019. “Our best performance in 22 years,” he cited.

This is why, Dominguez explained, the economic team frowned upon moves that would further increase the budget deficit to more than 9 percent from the 8.4 percent expected this year. They fear this can happen if the 18th Congress would insist to pass their proposed P1.3 trillion economic stimulus package dubbed as the Accelerate Recovery and Investments Stimulus for the Economy (ARISE) bill.

Both chambers of Congress adjourned sine die on June 5 without approving this along with the proposed Bayanihan to Recover as One Act (Bayanihan-2) and other economic stimulus bills like the DOF-endorsed bill on the proposed Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act.

As much as P355.68 billion have been released under the Bayanihan to Heal as One Act, or Republic Act (RA) 11469, Dominguez reported. RA 11469 allowed the President to re-align the 2020 budget to spend for the anti-COVID measures of the government. It expired already yesterday. Dominguez believes the President may consider asking Congress for special sessions if there may still be a need for Bayanihan-2.

The Finance chief disclosed four economic relief measures, including the CREATE bill, will be in the priority legislative agenda that President Duterte will present in his penultimate state of the nation address (SONA). Amid the C-19 pandemic, the President will reportedly deliver his SONA via tele-conferencing also for the joint opening of the third and last regular sessions of the 18th Congress on July 27.

Not to preempt the SONA, Dominguez told us, we can expect more economic relief measures, not new tax bills will be in the President’s legislative agenda for the last stretch of this administration.