Gov’t urged to look for new sources of revenue

The National Government (NG) should look for new sources of revenues and improve tax administration, as it seeks to reduce dependence on borrowings to fund the national budget, lawmakers and analysts said over the weekend.

The Department of Budget and Management (DBM) on Monday will hand over to Congress the proposed P6.352-trillion National Expenditure Program for 2025, which is equivalent to 22% of the gross domestic product (GDP). This is also 10.1% higher than this year’s PHP 5.768-trillion budget.

“[The] increase in budget is determined by the taxes we collect. We can’t spend too much, more than our means, a reason why we only increased the budget by 10%,” Finance Secretary Ralph G. Recto told BusinessWorld on July 22 in mixed English and Filipino.

“We are not maximizing the Philippine national credit card. We cannot loan too much [from domestic and multilateral lenders], only what is well within the means of what we can repay,” he added.

However, the government faces pressure to generate fresh revenues amid the ban on Philippine Offshore Gaming Operators (POGOs). Philippine Amusement and Gaming Corp. earlier estimated it will lose between P7 billion and P7.5 billion in annual revenue due to the closure of POGOs.

“There’s some pressure to generate new sources due to the POGO ban,” Albay Rep. Jose Ma. Clemente S. Salceda, Ways and Means Committee chairman, said in a Viber message, adding that he will discuss this matter with his Senate counterpart Senator Sherwin T. Gatchalian and Mr. Recto.

“[The POGO ban] has become an opportunity… We now have a basis to go after other taxes.”

Mr. Salceda said the government should resume reclamation projects along the Manila Bay, which will generate much-needed tax revenues.

“I continue to be a strong advocate of allowing the validly permitted Manila Bay reclamation projects to continue,” he said. “No reason why they shouldn’t be allowed to resume operations.”

In 2023, Mr. Marcos ordered the suspension of reclamation projects in Manila Bay, citing the need to conduct an environmental assessment. Mr. Salceda last year said the government could lose up to P432 billion in tax revenues from the suspension.

While he previously said there will be no new taxes, Mr. Recto said the Finance department is pushing for the approval of priority bills such as the proposed reform of the mining fiscal regime, excise tax on single-use plastics, and the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy bill.

Party-list Rep. Marissa P. Magsino, a member of the House Appropriations and Ways and Means committees, said pending tax measures in Congress could generate up to PHP 135.9 billion in revenues.

“Strict implementation of our existing revenue policies is the key in sustaining our funding needs,” Party-list Rep. Joseph Stephen S. Paduano, a member of the House Appropriations Committee, said in a Viber message.

He said “some entities” are using tax loopholes to evade obligations, harming the country’s fiscal stability. “We in Congress should also see to it that policy gaps in our tax system are minimized, if not eliminated.”

BORROWINGS

“Based on the revised medium-term fiscal program of the Marcos administration, the deficit will be higher next year despite higher tax revenues,” Zy-za Nadine M. Suzara, a public budget analyst and former executive director of policy think tank Institute for Leadership, Empowerment, and Democracy, said in a Viber message. “That means higher borrowing is inevitable to finance the national budget for 2025.”

For next year, the Development Budget Coordination Committee has set a PHP 4.644-trillion revenue collection target, while spending is set at PHP 6.182 trillion. Next year’s budget deficit ceiling is set at PHP 1.537 trillion, equivalent to 5.3% of GDP.

The NG borrows from both foreign and domestic lenders to fund its budget deficit as it spends more than its revenues.

“With such liberal economic assumptions and limited actual revenues, it is almost a certainty that the government will undertake domestic and foreign borrowing to fund next year’s budget,” Terry L. Ridon, a public investment analyst and convener of think tank InfraWatch PH, said in a Viber message.

As the NG outstanding debt hit a fresh high of PHP 15.35 trillion as of end-May, Mr. Ridon said it is critical for the government to keep a manageable debt-to-GDP ratio.

The NG’s debt as a share of the GDP stood at 60.2% as of the end of the first quarter. The government is targeting a 60.3% debt-to-GDP ratio by yearend, slightly above the 60% threshold deemed manageable for developing economies.

CASH SWEEP

Meanwhile, a provision in the 2024 budget authorizing the government to do cash sweeps of unutilized funds from government-owned and -controlled corporations (GOCCs) will not be included in the 2025 budget proposal, Mr. Recto said.

The insertion of the provision was at the behest of Congress, he added, noting that the clause is justifiable as money parked at GOCCs could be used to fund projects that could spur the economy.

“We just followed the instruction of Congress,” he said in Filipino. “The instruction is with merit because the money left sleeping in GOCCs could be used to grow the economy and create more jobs.”

Remittances by GOCCs to the government should be strictly limited to “unused and idle” funds so they may still perform its mandates, said Mr. Paduano.

According to Ms. Suzara, letting the government sweep unused GOCC funds should not be continued as it could lead to corruption.

PRIORITIES

As for the priorities in next year’s budget, the government has allocated at least a trillion for the funding of education and infrastructure agencies in next year’s budget, according to Mr. Recto.

“More or less… It’s about one trillion [each] for education and infrastructure,” he said.

Aside from increasing funding, there is also a need to improve resource utilization in the education sector to enhance the quality of Philippine education, said Ms. Magsino.

“Benchmarking against targets and comparison with other countries’ indicators show that there are significant gaps in the provision of school infrastructure in the Philippines, including instructional materials, water, school sanitation and hygiene facilities,” she said.

“We also emphasize that Philippine expenditure on education as a percentage of national GDP is not as high as our neighboring countries,” she added.

The Philippines only allocated 3.6% of its GDP to education in 2022 according to World Bank data, below the 4-6% benchmark set by the Incheon Declaration.

The Department of Education should involve teachers in assessing issues hounding schools to come up with holistic solutions, Jose Enrique A. Africa, executive director of think tank IBON Foundation, said in a Viber message.

On infrastructure, the government should continue funding “secondary and farm-to-market roads” to spur economic growth in provinces, said Mr. Ridon. – Kenneth Christiane L. Basilio