Draft dev’t plan calls for new taxes

BusinessWorld

Posted at Jan 25 2011 10:08 AM | Updated as of Jan 26 2011 03:45 AM

MANILA, Philippines - New tax laws will be pursued by the Aquino administration based on the draft 2011-2016 Philippine development plan, with officials saying a pledge not to push adjustments could be dropped by next year.

"We will see after 18 months if our targets were achieved," Finance Undersecretary Gil S. Beltran told BusinessWorld, echoing a view Finance Secretary Cesar V. Purisima reiterated earlier this month in a report.

The draft Medium-Term Philippine Development Plan (MTPDP) 2011-2016, which notes that the revenue position as of last year remained "precarious," states that "adjustments in the excise tax on alcohol and tobacco products, as well as the excise tax on petroleum shall be pursued" as part of planned policy reforms.

It also called for the "reversal of... unnecessary tax exemptions," noting "distortions in the tax system brought about by the enactment of piecemeal exemption laws."

The current tax administration tack will be maintained, with the draft MTPDP calling for the continuation of campaigns against tax evaders and smugglers and a more effective rewards/penalty system for revenue personnel, among others.

An increase in the tax effort to at least 16% of gross domestic product (GDP) -- it was at 13.3% as of September last year -- was proposed, along with non-tax revenues hitting 4-5%, by 2016.

"Correspondingly, the national government deficit should decline to 2% of GDP by 2013 and must be maintained at this level until 2016. Beginning 2013, the consolidated public sector deficit must be brought down to 1.5% of GDP," the draft MTPDP states.

Socioeconomic Planning Secretary Cayetano W. Paderanga, Jr. insisted that the no new tax pledge remained, noting that proposed legislation to hike excise taxes on so-called "sin" products only involved indexing rates to inflation.

"The president would like to know, by tightening the leakages both on the revenue collection and expenditure management, how much additional resources will be available," he said.

"Right now we’re focused on collecting more and discipline on the expenditure side," he added.

Mr. Purisima, in an interview published last Jan. 7 by GlobalSource, said the government saw the need to go to Congress for tax policies.

"Of course, the sin taxes is the easiest one. In fact, there is a bill now in the Congress. That did not emanate from us, but we’re not objecting to it either.

"Down the road, I would like us to go to Congress, but after we have done our homework then we will have the moral ascendancy to ask for increases such as an increase in the transactions tax, namely the VAT (value-added tax), and a corresponding reduction in income taxes."

Asked if an earlier statement that the no new tax pledge would only be valid for the first two years of the Aquino administration, he replied: "Yes, for the first 18 months."

The National Economic and Development Authority has said it planned to submit the 2011-2016 MTPDP to President Benigno S. C. Aquino III -- who made no new taxes one of his campaign promises last year -- sometime next month.