The Department of Finance (DOF) hinted broadly of difficulty obtaining consensus from legislators on the matter of crafting a tax-reform program able to support the country’s long-term growth requirement and on Tuesday bared of a stop-gap, worst-scenario alternative.
Finance Secretary Carlos G. Dominguez III bared apprehension that the Senate and the House of Representatives may not be able to present a tax-reform program able to support President Duterte’s very ambitious infrastructure buildup program and for this reason told reporters of the existence of a Plan B.
He said should the Comprehensive Tax Reform Program (CTRP) being crafted right now present the economic managers with prospective revenues lower than expected, the government would then be forced to scale back the budget deficit to no more than three percent of local output or the GDP.
“Yes, there is a Plan B. The Plan B is to stick to the 3-percent deficit-to-GDP. That is a hard number. We cannot afford to go beyond that,” Dominguez said at The Asset forum on Tuesday.
The economic managers capped last year’s budgetary shortfall as percent of local output to only 2.4 percent of GDP, instead of as much as 2.7 percent of GDP. The budget deficit last year totaled P353.4 billion.
For this year, the cap was set at 3 percent of GDP, or no more than P482.1 billion. The budget gap in the first nine months totaled P213.1 billion.
The DOF previously endorsed a tax-reform package version seen generating revenues amounting to P157 billion initially. The package proposed by the House of Representatives under House Bill 5636 projects revenues amounting only to P134 billion, while the Senate under Senate Bill 1592 is projecting revenues of only P59.9 billion.
The first package of the CTRP aims to lower the personal income-tax rates while implementing offsetting measures, such as expanding the taxpayer base, limiting value-added tax exemptions and increasing oil and automobile excise-tax rates, among others.
“We are happy with the house version (but) there is a Senate version which has not been voted on,” he said.
Meanwhile, the finance chief pointed out that the slow down in foreign direct investments (FDI) in the country, can be attributed to the lack of improved infrastructure, alongside the lack in improvements in line with the ease of doing business in the economy.
“First of all, I think the slow down in FDI is a direct result of the fact that our infrastructure is very poor, you know, but the foreign investors look at the government, basics of doing business and, so far, that has been inefficient, and we are trying to correct that,” he said.