By Elizabeth E. Escaño, Reporter

Underspending means gov’t can cut taxes, Escudero says

Posted on October 05, 2015

THE GOVERNMENT’S track record of underspending, which amounts to more than P600 billion since 2011, indicates that it has some leeway to cut income taxes, on which the estimated foregone revenue is only P30 billion, former Senate Finance Committee Chair Francis G. Escudero said in a statement on Sunday.

Taxpayers rushing to beat the dealine at a payment center. -- BW File Photo
“If we can afford not to spend more than P600 billion, then we can afford to ‘lose,’ as the Bureau of Internal Revenue (BIR) says, P30 billion, without sacrificing the people’s welfare,” said Mr. Escudero.

According to Mr. Escudero, underspending in 2011 was P154 billion, based on the budget of P1.711 trillion and disbursements of P1.557 trillion. In 2012, underspending was P62 billion, with a P1.84 trillion budget and actual disbursements of P1.778 trillion.

Mr. Escudero added that in 2013, P1.88 trillion out of the P1.984 trillion budget was spent, resulting in underspending of P104 billion, while an estimated P303 billion was underspent for last year. This totals to P623 billion in underspending from 2011-2014.

“It is not true that the government cannot accommodate tax cuts. The number one proof of this is that government underspending in the past years did not lead to its collapse. In fact, the government has even claimed success in its anti-poverty measures,” Mr. Escudero said.

Mr. Escudero added that it was not true that government services needed to be slashed in order to accommodate the proposed tax cuts, contrary to the claims of Liberal Party standard-bearer and former Interior and Local Government Secretary Manuel A. Roxas II.

Mr. Roxas had told reporters last week that those proposing lower income tax should also identify the programs that will have to be stopped to accommodate the proposed cut.

Still, Mr. Roxas said he was in favor of a periodic review of taxes.

According to a statement of the Department of Finance (DoF) last Thursday, the state’s budget balance for August stood at a P15.04-billion surplus, which is 45% below the programmed P27.33 billion for the month and half of the P29.87-billion surplus last year.

The revenue collection for August was P176.66 billion, up 4% year on year and 16% below the P209.35-billion target.

Government expenditure for August was P161.62 billion, up 15% from a year earlier but short of the P182.02-billion goal.

In the first eight months of 2015, government spending grew 11% year on year to around P1.444 trillion but this 15% below the P1.7-trillion goal from January to August 2015.

To meet the goal, government must spend P1.11 trillion in the last four months of the year.

Meanwhile, government revenue at end-August was P1.44 trillion, rising 13% year on year but still 4% below the programmed collection. The revenue collection target for 2015 is P2.275 trillion, which means that P834.36 billion should be collected from September to December 2015 to meet the goal.

Speaker Feliciano R. Belmonte, Jr. said last week that Congress does not have the time to pass an income tax reform bill. The House is currently tackling the proposed P3.002-trillion budget for 2016 and aims to approve it before session is adjourned on Oct. 9.

In response to Mr. Belmonte’s comment, House Ways and Means Committee Chairman Marikina Rep. Romero Federico S. Quimbo (2nd district) last week was optimistic about having enough time to pass the measure.

The bill from the House committee seeks to cut personal and corporate income taxes by first adjusting the rates to inflation and adjusting the current seven-tier bracket. Similar measures are pending in the Senate Committee on Ways and Means.

Senate Ways and Means Committee Chairman Senator Juan Edgardo M. Angara said in a statement released on Sunday that it is the House’s call if it wants to shelve the income tax reform bill.

“That’s their prerogative. We respect their decision. It’s a tough decision making environment they are operating in. If House doesn’t pass it, Senate can’t pass it. That’s the reality under the 1987 Constitution and the origination clause which states that all revenue measures must originate from the House. I would definitely refile the bill next Congress under the new administration,” said Mr. Angara.

President Benigno S. C. Aquino III met with Mr. Quimbo and Mr. Angara on Sept. 24 and discussed the proposals for reducing income taxes. As a result, Mr. Aquino directed the Finance department to take a look and study the proposals.

Prior to this, Mr. Aquino had said that he was “not convinced” of the benefits of lowering income taxes.

The DoF has opposed proposed cuts on income tax and said that there should be a “holistic” tax reform measure prior to the approval of a measure that will slash government revenue.