Ibon: Expect new taxes, more borrowings, less ayuda in ’23

WHILE the price of onion is expected to decrease, Filipinos will still be facing a number of challenges this year including new taxes, more borrowings, and less ayuda, according to Ibon Foundation Inc.

Ibon Executive Director Jose Enrique A. Africa said the economy is also expected to post slower growth this year and, given this, joblessness and informality are expected to follow.

Africa said the country’s infrastructure challenges are also expected to worsen; climate action will be “all talk;” corruption will worsen; and that “falling economic fundamentals” may largely be dismissed or ignored.

“Still, nothing is ever completely fixed. The government is still the single most powerful economic entity in the country with immense resources, machinery and regulatory powers. The problem is not that it is powerless but on what it is choosing to use its powers for,” Africa said.

“The rebound from reopening last year was the easy part and it’s this year that Marcos Jr and his economic team will really be tested. Hopefully the president will do better than when he failed his economics exam during his university days,” he added.

Ibon said in order to survive the year, the administration must first remove its “narrow-minded concern for credit ratings and socalled fiscal consolidation.”

Job losses

THE government cannot implement austerity measures given the expected impact of elevated prices on Filipino’s purchasing powers, the nongovernment group said.

The slowdown in the economy could lead to job losses and an increase in low quality jobs through the informal sector. This, Ibon said, could compound the already difficult labor conditions in the country.

Ibon noted that the first few years of the Duterte administration saw the worst average annual job creation in 3.5 decades.

With this, in 2019, before the pandemic began, Ibon estimated that 29.3 million Filipinos or 69.9 percent of total employment was accounted for by informal work.

Ibon said this included the 16.8 million openly informal workers such as domestics, family farms and business, and self-employed workers as well as 12.6 million in precarious work in unregistered establishments.

“Growth this year will be inhibited by scarring that includes weaker household incomes, depressed spending and consumption, and widespread small enterprise closures. There are also a few more factors inhibiting growth,” Africa said.

“The growth slowdown will underscore the structural inability of the economy to create enough productive employment – and make more people poorer, hungrier and discontented,” he added.

Binding constraint

DOCUMENTS from Ibon said that debt and debt service will also increase this year. It said that the national government’s debt has already reached P13.6 trillion as of November 2022 and is projected to grow to P14.6 trillion by the end of the year.

Africa said there could be over P2 trillion in gross borrowing but at least P1.6 trillion of this will go straight to debt service. As much as P582 billion could be for interest payments and P1 trillion for amortization.

He added that revenue generation efforts are also weak. The recent proposal to tax luxury items is meager compared to a wealth tax and that efforts to increase the value added tax and oil excise taxes will only burden the poor and the middle class even more.

Improving revenue generation, Africa said, must be to improve tax administration and efficiency. Raising taxes will only mean less income for lower income Filipinos.

“The binding constraint to steadier progress and development is the outdated faith in market forces. The blindness to the state’s responsibility to intervene will mean worse times in 2023. It will also reopen lockdown wounds that were hidden by last year’s rebound but haven’t really healed yet,” Africa said.

‘Louis Vuitton’ tax

EARLIER, House of Representatives Ways and Means Committee Chairman Jose Sarte Salceda estimated that a “Louis Vuitton” tax could generate P12.4 billion in revenues, a wealth tax can raise more than 10 times the amount.

However, Ibon said a billionaire wealth tax can raise at least P468.8 billion annually from the country’s estimated 2,945 billionaires who collectively have P8.2 trillion in wealth. The proposed “Louis Vuitton tax” will be levied on the purchase of luxury lifestyle items such as jewelry and bags, wines and art, cars, private jets, residences and others.

The wealth tax, meanwhile, is a tax on not even one-third of one thousandth of a percent (0.0026 percent) of the country’s population and will still leave them with P7.7 trillion.

Ibon proposed a graduated wealth tax of 1 percent on wealth above P1 billion, 2 percent on wealth above P2 billion and 3 percent on wealth above P3 billion.