No new taxes this year — DoF

Existing tax proposals instead will be refined to increase government revenues while helping the economy grow through robust business activities

Department of Finance Secretary Ralph Recto on Wednesday said he has no plans to push for new consumption-related taxes this year as the country still faces high inflation.

Instead, Recto said that the DoF will be refining existing tax proposals to increase government revenues while helping the economy grow through robust business activities.

“Frankly speaking, there are no plans of imposing additional taxes. I think our first job is to collect what is on the table. The fine-tuning will be on what is fair, easy to collect. We want to be practical,” he said Wednesday during a media briefing at the Bureau of Customs Building in South Harbor, Port Area, Manila City.

Tax proposals

The current tax proposals include the Real Property Valuation Reform or Package 3 of the Comprehensive Tax Reform Program, Value Added Tax on Non-Resident Digital Service Providers, and Rationalization of the Mining Fiscal Regime.

There is, too, the VAT Refund for Non-resident Tourists, SingleUse Plastic Bags Tax Act and Motor Vehicle User Charge. All those have already been approved by the House of Representatives on final reading for review of the Senate.

The Real Property Valuation Reform or House Bill 6558 aims to adopt global property valuation standards for the Philippines. The House of Representatives last month approved the bill on final reading for review of the Senate.

Meanwhile, the digital services tax on foreign firms or House Bill 4122 requires 12 percent VAT on sales of online services, such as the hosting of online auctions and supplies of online products and services. House Committee on Ways and Means chairman Albay 2nd district Rep. Joey Salceda expects it to add P3 million to P12 million to government revenues.

The mining bill or House Bill 8937 reduces the royalty rate on the gross output of minerals from large-scale mining operations from 5 percent to 4 percent. Senator Sonny Angara expects this to generate annual revenues of P12 billion to P14 billion.

Another is the Motor Vehicle User Charge or MVUC which imposes gradual increase of tax payments for road usage of motorists toward a 5 percent increase to be paid starting 2027.

“We're tempering that proposal because motorists already have too many taxes to pay. There are excise taxes and VAT on oil and vehicles,” Recto said.

“Today, 50 percent of vehicles are unregistered and if you impose higher taxes, maybe more vehicles will not be registered. We have to temper these taxes because they're also inflationary,” he added.

No taxes on junk food and sweetened products

Given the inflationary risks from consumer goods, Recto said the DoF will not pursue its proposals for taxes on sweetened products and junk foods this year.

The bill on sweetened products has been pending since March last year with the House of Representatives, while no lawmaker both from the lower legislative chamber and the Senate, the upper chamber, has authored a bill regarding taxes on junk foods.

“Like I said, when you impose new taxes that is also inflationary. So, I don't think now is the time to impose very high taxes,” Recto said.

Because of the need for financial assistance and the initiation of infrastructure projects during the Duterte administration, the Marcos administration inherited a whopping P12.79 trillion debt.

Hence, former Finance Secretary Benjamin Diokno wanted to introduce taxes on junk food and sweetened beverages.

‘Like I said, when you impose new taxes that is also inflationary. So, I don’t think now is the time to impose very high taxes.’

As a pivotal reform initiative by Diokno, the junk food and sweetened beverages tax program aimed to levy a tax of P10 per 100 grams or P10 per 100 milliliters on pre-packaged foods deemed to lack nutritional value.

Diokno had said that if signed into law, the junk food tax could add P76 billion to government revenues in the first year of its implementation.

However, Recto said the government can still support its public services even without such food and beverage taxes.

Debt manageable

“Our debt is manageable. There is no fiscal crisis unlike in the early 2000s when debt-to-GDP (gross domestic product) ratio was high at 70 to 75 percent,” he said.

In the third quarter last year, the debt-to-GDP ratio improved to 60.2 percent from 61 percent recorded in the second quarter, the Department of Budget and Management reported.

“National debt is normally high, P14.5 trillion roughly or 60 percent of GDP. The idea is to bring that down to 51 to 55 percent,” Recto said, emphasizing that the key lies in the country's ability to repay it, not the size of the debt.

The country's total national debt of P14.51 trillion as of

Novemberr 2023 reflects a 0.19 percent increase compared to the P14.48 trillion reported as of October 2023.

Recto outlined a plan to gradually reduce the debt ratio to 51-55 percent by cutting the deficit by 1 percent annually.

He sees two avenues for achieving this: increasing revenue and boosting economic growth.

"The idea is to grow the economy faster," Recto explained. "When you grow the economy, you broaden the tax base and collect more taxes. That's the best way to raise more revenue without raising the debt," he said.