New taxes by 2013, Noy tells US group

It seems that the Aquino administration is giving Filipinos promises it does not intend to keep as it indicated to a foreign group it will adopt new tax measures by 2013 against its vow not to impose new taxes and instead seek reforms in tax collections to increase revenues.

The Washington-based Institute of International Finance (IIF), in a policy note, said the Aquino administration had made a promise for new tax measures that generated positive comments from the global association of financial institutions.

It said the turnaround was welcomed after its initial reluctance to adopt new tax measures that has “threaten(ed) to undermine fiscal sustainability over the longer run.”

“The government’s success in containing and reducing the budget deficit is to be applauded, but the structurally low tax incidence threatens to undermine fiscal sustainability over the longer run,” the IIF said in a briefing paper called “Philippines: Fiscal Correction on Track.”

The government is targeting to slash the budget deficit to P270 billion or 2.5 percent of local output or the gross domestic product (GDP) next year from about P300 billion or 3.2 percent of GDP this year after a record P314 billion deficit last year or equal to 3.7 percent of GDP.

“There can be little doubt that insufficient fiscal support for social programs and infrastructure development has impeded growth and development,” the IIF said.

It noted no new tax measures have been planned for 2012, “suggesting that the government intends to remain focused on efforts to improve tax administration and collection.”

Government projections place revenue collections to rise to P1.445 trillion or 14.1 percent of GDP next year from P1.273 trillion or 13.6 percent of GDP this year.

Public expenditures were also seen rising to P1.842 trillion or 17.9 percent of GDP from P1.711 trillion or 18.3 percent of GDP.

Economic managers also indicated plans to trim the budget deficit to about two percent of GDP starting 2013 until the end of the term of President Aquino in 2016.

The country’s budget deficit swelled to a record level of P314.4 billion or 3.7 percent of GDP last year from P298.5 billion or 3.9 percent of GDP in 2009.

According to the IIF, the government should put in place new tax measures starting 2013 to be able to ensure fiscal sustainability over the longer term.

“The government is mindful of this shortcoming and has indicated that new revenue-raising initiatives will be forthcoming in the 2013 budget,” IIF said. CL, Daily Tribune