LOOK: Department of Finance is Pushing for These New Taxes to Pay High Debt
From raising new taxes to expanding VAT coverage, and more, the Department of Finance proposed measures to help pay the country’s high debt.
Over time, the country’s debt has been rising drastically—ballooning up to ₱12.68 trillion as of March 2022—which raises the current issue: how to pay it all back?
In order to help pay the country’s high debt, the Department of Finance (DOF) proposed some measures: raising new taxes, deferring personal income tax reductions, and expanding the Value-added Tax (VAT) coverage, among many others. These are, what the DOF considers “critical,” especially with President Rodrigo Duterte preparing to turn over the reins of government to President Ferdinand “Bongbong” Marcos Jr.
Proposed Fiscal Consolidation and Resource Mobilization Plan
In its proposed Fiscal Consolidation and Resource Mobilization Plan, the DOF said that these new tax measures aim to generate an average of at least PHP 349.3 billion in new revenues from 2023 to 2027. “Pursuing the fiscal consolidation and resource mobilization program, as proposed, will help us continue to spend on socio-economic programs, maintain our credit ratings, and grow out of our debt,” explained Finance Secretary Carlos Dominguez III in a statement.
He further added that without these measures, the government may need to cut spending on socio-economic programs or finance debts by borrowing more money, which would likewise lead to “cascading effects on interest payments that could also ultimately force budget cuts and stifle economic growth.”
According to the DOF, these new measures include carbon tax, as well as taxes on motorcycles, single-use plastics, and cryptocurrencies—all of which aim to reverse (in a span of 10 years) the additional PHP 3.2 trillion debt incurred by the government due to the COVID-19 pandemic, which was borrowed on top of its programmed PHP 9.9 trillion.
To pay this extra debt, the government needs to raise at least PHP 249 billion every year in incremental revenues for the next 10 years, based on data from the Bureau of Treasury. “The measures proposed by the DOF are estimated to yield an average of roughly P284 billion every year for the national government,” the DOF said.
Working with a Tight Budget
While there are proposed measures to raise additional funds for the government, the money will also need to be delegated to the country’s ongoing expenses and projects. Thus, Budget Secretary Tina Canda says that the incoming administration will need to live with a “tight” budget of around P5.268 trillion in 2023.
On the other hand, Socioeconomic Planning Secretary Karl Chua also said the next administration needs to “live within its means” and be more prudent. “You don’t spend if you don’t have revenue, and if you spend, you do it in a targeted manner, and if you spend, you raise the revenue,” he said.
However, prior to the presentation of the DOF’s fiscal consolidation program, Chua said that he was not in favor of raising new taxes. “Any tweaking of the present tax system is not our recommendation. They have proven to be effective to bring down income taxes for 99 percent of income taxpayers, whether you are individual or corporate,” he explained.
“We have expanded the tax base to fund all the human capital and infrastructure programs that we are benefiting from. So we do not recommend at all changing the present tax system,” he added.
Raising Taxes: An Added Burden?
Meanwhile, House Deputy Minority leader and Bayan Muna Rep. Carlos Isagani Zarate criticized the DOF’s proposal—calling it an added burden to the poor and middle-class citizens. “Bakit ba ang target ng DOF ay palagi na lang ang mga mahihirap at ang middle class ang buwisan? Bakit hindi ang mga malalaking korporasyon at mga super yamang bilyonaryo?” Zarate said.
[Rough Translation: Why does the DOF always target the poor and middle-class? Why don’t they target the larger corporations and the very rich billionaires?]
Instead of the proposed measures—which he called “very regressive and anti-poor”—he recommends that the government push instead of taxes on wealth. “A wealth tax of 1 percent, for example, can be levied on every million earned by an individual, [or to a] family of corporations, or something to that effect. It can also vigorously go after the Philippine Offshore Gaming Operators (POGOs) and have them pay their billions worth of accrued taxes,” said Zarate.
On the other hand, the DOF said that it was ready to brief the incoming administration’s economic team on the aforementioned measures in its proposal. “The next administration is coming in with a strong mandate. We are confident that the soon-to-be President will put it to good use by pursuing critical reforms such as this much-needed program,” Dominguez said.