Pursue progressive tax reforms, government urged

CEBU, Philippines — The Marcos administration should find new sources of revenue and reconsider the bill that seeks to further lower taxes imposed on domestic and foreign companies, economists said.

This as the government raised its budget deficit ceiling for the next five years to pursue flagship infrastructure projects.

“Increasing the deficit is not the only way to support an increasing budget which is necessary when growth is declining,” former Finance Secretary Cielo D. Magno said in a Facebook Messenger chat.

The Development Budget Coordination Committee (DBCC) last week lowered the gross domestic product (GDP) target for this year to 6-7% from the 6.5-7.5% estimate given in December.

It also raised this year’s deficit ceiling to P1.48 trillion, slightly bigger than the previous P1.39-trillion ceiling. It expects the deficit as a share of gross domestic product (GDP) to settle at -5.6% this year from -5.1% previously.

The deficit ceiling for 2025 was also revised to P1.49 trillion from P1.23-trillion previously. The target for the deficit-to-GDP ratio was raised to -5.2% for 2025 from -4.1% previously.

Ms. Magno said the government can create new sources of revenue by raising taxes on mining, alcohol, and tobacco.

The government should reconsider proposed policies that may erode the tax base, and those that may create additional tax leakages, she added.

Ms. Magno mentioned the bill seeking to amend the pandemic-era Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act. The CREATE MORE (Maximize Opportunities for Reinvigorating the Economy) bill proposes to lower the corporate income tax to 20% under an enhanced deduction regime and streamlining the tax refund system for corporations.

Ms. Magno lamented that there has been an increase in discretionary spending like the confidential and intelligence funds, and insertions in the 2024 national budget that were not part of the national expenditure program like items lodged under the Public Works department that have no program of work.

“Aside from fixing tax administration, the government should rationalize spending, improve the targeting efficiency of social programs and plug corruption in government,” she added.

The government is seeking a 7.5% increase in the proposed 2025 national budget to P6.2 trillion from this year’s P5.76 trillion.

Emy Ruth Gianan, who teaches economics at the Polytechnic University of the Philippines, said the administration should also consider a wealth tax as it pushes for a 7.5% increase in the national budget.

“It would be a difficult route, politically arduous too, but I believe it would be a significant and highly beneficial reform,” she said in a Facebook Messenger chat.

Diwa C. Guinigundo, a former central bank deputy governor who is now a Philippine analyst at the GlobalSource Partners, said the government should ensure that the budget is spent well and should implement new taxes that are progressive and previously untapped “with minimal social cost.” — (FREEMAN) (Bworldonline.com)