State economic managers are looking for ways to cushion the fiscal impact on the national government of a Supreme Court ruling that would give local governments a bigger share in national taxes.

ECONOMIC MANAGERS are committed to keeping the government’s budget deficit manageable despite a Supreme Court (SC) ruling in favor of more state allocations to local governments, saying above-target revenue collections will help while they appeal the decision.
Members of the Development Budget Coordination Committee (DBCC) met on Monday ahead of their presentation of economic assumptions today at the hearing of the House of Representatives Committee on Appropriations on the proposed P3.757-trillion 2019 national budget.
Budget Secretary Benjamin E. Diokno said state economic managers agreed that the Executive will file a motion for reconsideration (MR). “’Yung decision namin is to file an MR,” Mr. Diokno told reporters after the meeting.
Asked whether the government would keep its budget deficit ceiling this year at three percent of gross domestic product (GDP) despite the high court’s ruling, Mr. Diokno replied: “Sinabi naman namin na hindi naman negotiable ‘yun (We agreed that that level is non-negotiable).”
“We’re determined to… we can do it below three percent and at the same time without sacrificing the ‘Build, Build, Build’ and the social, we will do it.”
The high court’s July 23 ruling added tax collections of the Customs bureau to local governments’ annual internal revenue allotments, which have included just collections of the Bureau of Internal Revenue so far.
The Budget chief said that complying with the ruling would cost the government some P160 billion more and economic managers had initially warned that implementing the ruling could jack up the fiscal deficit to as much as six percent of GDP.
One tack to keep the fiscal deficit intact would be devolving some functions, such as the conditional cash transfers, farm-to-market roads and health care services.
At the same time, Mr. Diokno said, making sure revenue collections hit or exceed targets will help as well.
Halimbawa (for example), we’re ahead by eight percent sa revenue target (in the) first semester. So kung ganon, hindi namin mahihit ‘yung (It could turn out that we may not even hit the fiscal deficit) target. In fact, ganon nangyari last year. Our target was three percent (of GDP), ang lumabas (the actual budget gap hit just) 2.2% lang,” Mr. Diokno said.
Asked whether the pace of revenue growth would be sustained towards the end of the year, he replied: “Most likely above target kami.”
Mr. Diokno said the government will seek clarification on which taxes would be covered in its motion for reconsideration.
“We want to clarify what specific taxes are really covered. Kasi meron doon included and excluded. But there’s some taxes katulad ng lahat ng nakokolekta sa mga ecozones (like those collected in economic zones). Na-estimate din namin P40 billion ‘yon. Is it BIR? Is it national? So hindi namin alam (We do not know how those collections are classified.”
Finance Secretary Carlos G. Dominguez III shared this view, saying: “What we want to do is get a clarification on the law, to see what it really means… One step at a time.”
Mr. Diokno also said that the DBCC was “ready” for the first budget deliberations at the House of Representatives scheduled today.
“We’ll talk about the macroeconomy, as well as the assumptions,” he said, noting that he expects concerns from legislators over high inflation that clocked in at a multi-year-high 5.2% in June and averaged 4.3% last semester — above the central bank’s 2-4% target range for full-year 2018.
“The IMF (International Monetary Fund) said it (intensified inflationary pressures) is transitory, and we’ll be back to 2-4%. Totoo naman ‘yun eh (That is true),” Mr. Diokno said, citing the need for Congress to approve a law that will bring back a regular tariff scheme for imported rice that will cut retail prices of the grain by an estimated P7 per kilogram, as well as for the Executive to implement mitigating measures for those affected by higher prices fueled by ongoing tax reform.
“Plus there’s the element that it’s demand-driven. We’re actually putting more money in the pockets of individuals: P35 billion every quarter. Ang laki ng pera non (That is a lot of cash),” he added, referring to lower personal income tax rates under Republic Act No. 10963, which had also increased or added taxes on several items.
The DBCC expects inflation to average 4-4.5% this year and 2-4% in 2019. — Elijah Joseph C. Tubayan