House Committee on Ways and Means Chairman Joey Sarte Salceda said the replacement to President Duterte needs tax the rich so that government would have enough funds for debt payments and adequate social services.
In a statement issued last Tuesday, Salceda said the next President will almost certainly push for one round of tax reforms within the new Chief Executive’s first year in office to make sure there’s enough cash in government’s coffers.
“The rich have gotten richer during the pandemic, and this is common experience,” Salceda said citing a study on the effects of five pandemics between 2003 and 2016.
According to Salceda, the study he didn’t name found that “on average, income inequality in affected countries increased over the five years following each event, with the effect being higher when the crisis led to contraction in economic activity, like Covid-19.”
“So, our next round of tax increases will have to fall on the wealthy,” the lawmaker-economist added.
Salceda believes that in terms of debt, the Philippines is “still on strong footing.”
“But the margin for error grows less when you have the kind of fiscal space we have. That is why the Committee on Ways and Means does all it can to improve both tax policy and tax administration. We have changed about as much in tax laws as we did in tax administration.”
The lawmaker further explained that the Duterte administration “is poised to become the best tax collector as a share of GDP [gross domestic product] since [President Fidel V.] Ramos.”
“If our tax policymakers in the next government can sustain the kind of tenacity and decisiveness with which our committee did tax reform, we should be in a much better position to deal with our debt,” Salceda said.
National government’s outstanding debt went down to P11.73 trillion as of end-December 2021 from P11.93 trillion in the previous month due to net redemption of government securities, according to the Bureau of Treasury.
Key points
SALCEDA also recommended that government focus on three key points to manage the country’s debt levels.
“First, we should be investing more in long-term, growth-creating programs than our debt payments. Doing so means we are putting more money in things that will help us pay debt in the future. Thus, our infrastructure and long-term investments should be bigger than debt payment,” he said.
Salceda explained that capital outlays for Fiscal Year 2022 is 1.019 trillion, or 20.3 percent of the national budget, or around 5.6 percent of GDP. Debt service will be 5.9 percent of GDP, on the other hand.
“On that front, we clearly need to bring our long-term investments back to a healthy level versus our debt,” he said. “I am reassured by the statements of all major presidential candidates who want to keep the Build, Build, Build program.”
Second, Salceda said the government should do its best to keep interest payments low.
“The current Treasurer of the Philippines has been very successful at keeping the average interest rate on government debt very low–with or without crisis,” he added. “One thing to watch is the appointment of the next National Treasurer by the next President.”
Third, Salceda said the government should keep an eye on the schedule of debt payments.
“The first big bond redemptions we are making is in 2024 and 2025, with around P60 billion at each round,” the lawmaker said. “Mind you, we have a big personal income tax cut coming in 2023, at around 5 percent of the average worker’s income.”