New taxes ruled out amid record debt

The government will not introduce new tax proposals in the 20^th Congress, Finance Secretary Ralph G. Recto said, reaffirming the administration’s fiscal consolidation strategy despite record-high debt.

Speaking with reporters after a Development Budget Coordination Committee briefing at the House of Representatives on Monday evening, Mr. Recto said the Marcos administration would instead focus on previously filed measures including an excise tax on single-use plastics and a tax amnesty program.

Asked whether the Department of Finance would back additional tax initiatives, Mr. Recto replied: “No.”

He also said the government was not considering increases in existing tax rates too.

“We only have the single-use plastics remaining, that’s number one,” he said. “Also possibly, a tax amnesty.”

Mr. Recto had earlier stressed that new revenue measures were unnecessary, pointing to what he described in April as the country’s “robust” fiscal position.

Government data showed the Philippines’ debt-to-gross domestic product ratio had risen to 63.1% as of end-June, its highest level since 2005. The figure remains above the 60% threshold that multilateral lenders view as manageable for developing economies.

The debt ratio is expected to ease to 61.3% by yearend, though still above the earlier 60.4% target, according to a Finance department handout.

Outstanding debt stood at a record PHP 17.27 trillion in June, up 2.1% from the previous month and 11.5% higher than a year earlier.

The excise tax on single-use plastic bags was one of the 28 priority bills identified by the Legislative-Executive Development Advisory Council. While it was approved by the House on third reading in 2022, the measure was stuck at the Senate Ways and Means Committee.

The Finance department last year said the government could raise up to PHP 33.8 billion in excise taxes on single-use plastic bags.

Three measures, which all seek to impose a PHP 100-per-kilogram excise tax on single-use plastic bags, have been refiled at the House. A Senate counterpart bill proposes a lower rate of PHP 20 per kilogram.

Mr. Recto in early August said the government is also looking at proposing a tax amnesty that will involve an amnesty charge set at a yet-to-be-determined percentage of the outstanding unpaid tax, in exchange for immunity from civil, criminal and administrative penalties.

Lawmakers in the House and Senate are pushing for a general tax amnesty that will impose a 2% amnesty tax rate dependent on the total assets of taxpayers up to 2024.

The Finance department’s decision to hold off on introducing new taxes is a “good move” given that proposing new levies could dampen household spending, said Reinielle Matt M. Erece, an economist at Oikonomia Advisory and Research, Inc.

“More taxes will effectively reduce disposable income of households since more of their income will be directed to taxes rather than consumption,” he said in a Viber message.

“Fiscal consolidation is important to better manage debt and budget efficiency, but if it comes at the expense of economic performance then it may be best to rethink the strategy to achieve this goal,” he added.

While the proposed excise tax on single-use plastics and tax amnesty could boost state revenues, the government should look at expanding the tax base and ensure that revenue streams are “future-proof,” John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies, said.

“These should be seen as complementary, not core, measures,” he said in a Viber message. “What we need is better tax administration, improved enforcement and expanded coverage of existing tax measures.”

Mr. Rivera said that if the Finance department reverses its initial stance, then it should look at its impact on Filipino consumers and businesses.

“Any move must be weighed against inflation risks and its impact on consumers and businesses.” — Kenneth Christiane L. Basilio, Reporter