By Bernadette D. Nicolas & Jovee Marie N. Dela Cruz
THE national government’s budget deficit for the first five months of the year ballooned to P562.2 billion, nearly 695 times as much as the previous year’s budget gap of only P809 million for the period.
Latest data from the Bureau of the Treasury (BTr) as of end-May showed that government disbursements continued to increase to P1.665 trillion, while revenues shrank to P1.102 trillion due to the Covid-19 pandemic.
The release of the data prompted the chairman of the House Committee on Ways and Means to say the government should now consider borrowing to narrow the country’s budget gap amid the economic downturn caused by the coronavirus pandemic.
According to Albay Rep. Joey Sarte Salceda, Congress will help find ways to pay for what the country will borrow by approving several revenue measures.
A budget deficit occurs when expenditures exceed revenues.
Government expenditures for the period surged by 26.63 percent from last year’s P1.315 trillion.
Broken down, primary spending—net of interest payments—surged by 29.30 percent to P1.504 trillion as of end-May this year from P1.164 trillion in the same period in 2019.
Interest payments for the five-month period also showed an uptick of 6.05 percent to P160.1 billion from P151 billion in 2019.
On the other hand, revenues from January to May this year took a hit as it contracted by 16.09 percent from P1.314 trillion in 2019.
The Bureau of Internal Revenue’s (BIR) tax take for the period slid by 25.84 percent to P673.7 billion from P908.5 billion a year ago.
Meanwhile, collections by the Bureau of Customs (BOC) as of end-May also dropped by 16.37 percent to P210.5 billion from P251.7 billion in 2019.
The BTr, for its part, collected P171.9 billion, more than twice its revenues last year at P77 billion.
Cumulative collection from other offices was also down by 40.47 percent to P39.4 billion from P66.3 billion last year.
Excluding interest payments from expenditures, the government’s year-to-date primary deficit also increased to P402.1 billion, a reversal of 2019’s P150.2-billion primary surplus.
For May alone, the government fiscal balance swung to a P202.1-billion budget deficit, a turnaround from the P2.6-billion budget surplus in the same month last year as government disbursements exceed revenues.
Revenues for the month dropped by 52.25 percent year-on-year to P151.5 billion from P317.2 billion in May 2019 with both tax and nontax revenues declining by 45 percent and 88 percent, respectively.
Collections by the BIR continued to drop in May, posting only P114.4 billion. This was a 44.13-percent decrease from May 2019’s P204.8 billion.
Income from the BTr settled at only P2.4 billion, steeply declining by 93.30 percent from P35.7 billion in May 2019 because of the timing of remittances of dividends. These were remitted in May 2019 but received earlier this year due to the implementation of the Bayanihan to Heal As One Act.
Revenue from other offices went down by 75.50 percent to P3.9 billion from the previous year’s level of P16 billion, which was still attributed to the nationwide lockdown due to the pandemic affecting the operations of various national government collecting agencies.
Expenditures climb
Meanwhile, expenditures in May climbed by 12.38 percent to P353.6 billion, outperforming May 2019’s P314.7 billion.
The acceleration was propelled by the releases for the second tranche of the Small Business Wage Subsidy (SBWS) under the Social Security System in line with the implementation of Republic Act 11469 or the Bayanihan law.
Primary spending was also up by 13.65 percent to P335.3 billion in May from P295 billion in the same month last year.
Total interest payments for the month also slipped to P18.4 billion, declining by 6.69 percent year-on-year from P19.7 billion in May last year due to domestic debt that matured last year.
Primary deficit for the month also amounted to P183.8 billion, coming from a P22.2-billion budget surplus in May 2019.
The country’s budget deficit this year is also expected by the government’s economic team to widen to 8.4 percent of GDP or P1.613 trillion due to the drop in revenues and increase in disbursements. This is significantly wider than the country’s budget deficit of 3.4 percent of GDP or P660.2 billion in 2019.
The Development Budget Coordination Committee is also expecting the country’s budget deficits to be at 6.6 percent of GDP or 1.429 trillion in 2021 and 5 percent of GDP or P1.181 trillion in 2022.
Tax measures
In pitching a resort to borrowing to narrow the deficit, Salceda said Congress can pass the tax measures that would boost the Philippines’ credit ratings and make loans cheaper.
Salceda said the tax on digital economy is estimated to yield P29.1 billion, while the taxes on POGO, or the Philippine Offshore Gaming Operators, will give the government P45 billion annually.
He said the proposed Motor Vehicle Road Users’ Tax will provide the government P205 billion in additional revenue in five years.
“I would advise the government to…spend what we need now, whatever it takes for the country to survive Covid-19 and its impact on poverty and unemployment, and borrow if we must,” he said.
“We should borrow now, otherwise, balance sheet problems, when neglected, tend to get worse over time,” said Salceda, an economist.
“The deficit is added to our national debt. Now, you should consider two questions when you discuss national debt. Do we absolutely need to borrow? And, can we pay for what we borrow? The first question is an obvious case. We need to borrow, as do many other countries in the world. Even countries with strong non-tax sources like Singapore, with its own sovereign wealth fund, is borrowing immensely for Covid-19,” he noted.
“The second consideration requires more commitment, although in the case of the Philippines, the situation is much easier than it would be in, say, an aging country like Japan,” Salceda added.
He, meanwhile, said he is ready to sponsor all the revenue measures any time the leadership sets the date.
“We will have to do tax policy and administration reforms like the revenue measures we are proposing—digital tax administration, POGO taxes, updated road users’ tax—to help narrow the gap,” he said.
“We are undergoing technical working group discussions on digital taxation, and POGO taxes and road users’ tax are already approved by my committee,” he added.
Image credits: Nonie Reyes, Nonoy Lacza
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