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Gov’t working on new tax measures

Posted on April 01, 2011

WORK is already under way on new tax measures the government hopes to introduce next year after the end of a self-imposed limitation, a Finance official yesterday said.

"We are studying everything and we will file the bills next year," Finance Undersecretary Gil S. Beltran told BusinessWorld yesterday.

President Benigno S. C. Aquino III’s campaign promise not to raise taxes has been criticised as ill-advised given the perennial government deficit, but Cabinet officials have said this only applied up to the end of 2011.

The issue was again raised earlier this week at a forum where a former Budget secretary questioned the policy of seeking to increase revenues via tax administration improvements.

Finance Secretary Cesar V. Purisima, who was present at Tuesday’s Open Budget Partnership Forum, said he would consider the proposals raised by economist Benjamin E. Diokno, budget chief during the Estrada administration.

"I have no stance on it yet. We will study it first," Mr. Purisima said.

Mr. Diokno urged the government to ditch its "no new tax" policy to fulfill key promises such as the extension of the basic education term, expanded conditional cash transfers, the modernization of the armed forces and increased infrastructure spending.

It will be impossible to implement these programs, he said, without implementing new taxes or breaching the goal of keeping the budget deficit to 2% of gross domestic product by 2013.

Mr. Diokno said one area that could be reformed is excise taxation, particularly with regard to the rates levied on cigarettes and liquor.

He also urged the government to "tax consumption, not income," by increasing the value-added tax (VAT) to 15% from 12% -- the higher rate was described as not unusual conmpared to some Asian countries -- while at the same time lowering personal income tax rates.

"An individual should be taxed on the basis of what he takes away from society -- consumption -- rather than what he contributes to society -- income," Mr. Diokno said.

Real property taxes (RPT) can also be improved by having the national government increase rates.

"We need to tax wealth, and right now we’re only collecting 1% to 2% in real property taxes," Mr. Diokno said, adding: "That’s why investments in our country are biased towards real property."

He also suggested that the national government "presume" the amount of RPT due from each local government unit (LGU) and automatically deduct these from internal revenue allocations.

Approval of these new tax measures, said Mr. Diokno, should be pushed as soon as possible since legislators may be wary about supporting them just ahead of the 2013 mid-term elections.

"The likelihood of success is enhanced when the mandate is fresh and the timing is not too near the next elections," he said.

Mr. Diokno also said new taxes could be made more palatable to the public by presenting them as a part of public sector reform.

Senator Teofisto D. Guingona III, who hosted the Open Budget Partnership Forum, said the tax measures were "very sensible."

However, "it is very unlikely they will be passed next year because the elections are approaching," he added. -- D. C. J. Jiao