Recto urged to prioritize reforms to boost tax compliance, not new taxes

NEWLY APPOINTED Finance chief Ralph G. Recto must focus on tax reforms that will address issues preventing efficient tax collection and compliance, as well as consider more progressive taxes to boost revenues, analysts and business groups said.

“Reducing the burden of compliance with tax laws is a major concern for investors, and we look forward to the Department of Finance (DoF) and its attached agencies continuing to engage the private sector to resolve challenges related to this,” Ebb Hinchliffe, American Chamber of Commerce of the Philippines, Inc. executive director, said in a Viber message.

Enrico P. Villanueva, senior lecturer of economics at the University of the Philippines Los Baños said in a Facebook Messenger chat that he hopes Mr. Recto will focus on tax collection efficiency and reduction of corruption.

Mr. Recto on Friday took his oath as Finance secretary, replacing Benjamin E. Diokno, who is returning to the central bank as a Monetary Board member.

The former senator and Batangas congressman said that he will be continuing the strategies under the Philippine Development Plan and the Medium-Term Fiscal Framework. “There is a plan, there is a roadmap that essentially we will continue,” he added.

Mr. Recto also committed to reaching the tax collection targets this year. The Bureau of Internal Revenue is expected to raise P3.05 trillion and the Bureau of Customs is seen to collect P1 trillion, based on the Budget of Expenditures and Sources of Financing.

“So, every night, when I wake up in the morning, we should have collected more or less P20 billion to fund all the needs of our people

and the requirements of government, and to make sure that money is spent wisely because we have to stretch every peso, including acting faster on investment,” he said.

In a statement on Friday, Mr. Recto said he will push for the immediate passage of key tax reforms endorsed by the President as priority measures in Congress.

“I agree that we need funds to finance growth and our people’s growing needs and install a system that promotes fair and fast tax administration. These measures will not only finance development but will reduce the deficit and our dependence on debt,” he said.

Filomeno S. Sta. Ana III, coordinator of Action for Economic Reforms, said that Mr. Recto must be able to push for reforms as soon as possible, ideally within the first half of Mr. Marcos’ term.

Mr. Sta Ana said that pushing for reforms later is “dangerous” as legislators will become more “sensitive to politicking and pressure from lobbying by vested interests that dangle campaign financing to politicians.”

“The incoming Finance secretary has to pursue the reforms that the DoF has endorsed, but which have been sidelined or derailed. Where Mr. Diokno failed, the new Finance secretary must succeed. Whether the new secretary will have the courage to pursue the tax reforms remains to be seen,” he said.

“It is a big challenge, given that the window to have the reforms legislated is closing amid the politicking and infighting as we get closer to the midterm election cycle,” he added.

WEALTH TAX?

Sonny A. Africa, executive director of think tank Ibon Foundation, said he hopes that Mr. Recto will be open to moderating “regressive consumption taxes that disproportionately burden the poor and ordinary Filipinos.”

“Still, even limiting new consumption taxes to single-use plastics and digital services does not go far enough,” he said, adding that Mr. Recto should also correct the “growing regressiveness” of the tax system. Mr. Africa also urged the new Finance chief to revisit the proposed wealth tax, which would help the government significantly ramp up revenue generation.

Data from Ibon Foundation showed that a 1% tax on wealth over P1 billion, 2% tax on wealth over P2 billion, and 3% tax on wealth over P3 billion could generate around half a trillion annually.