‘No plans’ for new taxes – Recto
NEW taxes are not on the new Finance secretary’s agenda and the government will instead focus on improving revenue collections to help fund its spending needs.
“Inflation is high … and when you impose taxes, that is also inflationary,” Finance Secretary Ralph Recto told reporters on Wednesday during a briefing at the Bureau of Customs (BoC).
“So I don’t think that now is the time to impose very high taxes … frankly speaking, there are no plans of imposing additional new taxes,” he added.
“I think our first job is to collect what is on the table. And that’s why we are planning with the BIR (Bureau of Internal Revenue) and the Customs commissioner to improve efficiency.”
Tax proposals pushed by his predecessor, Benjamin Diokno, will still be pursued but several have to be reviewed and amended with a view to making rates “fairer” and easier to collect.
Some of the tax measures that the Finance department wants Congress to pass are the Real Property Valuation and Assessment Reform measure, a value-added tax (VAT) on digital service providers, a VAT refund for non-resident tourists, and the proposed Passive Income and Financial Intermediaries Taxation Act.
“We’re tweaking them,” Recto said, again noting that additional taxes would have an inflationary effect.
“[T]he fine-tuning will be on what is fairer, number one. What is easy to collect, number two. What is practical — that’s how we’re looking at it.”
One of the measures being revised is an increase in the road user’s tax — approved by the House of Representatives last month but has yet to be passed by the Senate.
Recto — who was Senate president before being named Finance chief two weeks ago — said motorists were already paying “a lot of taxes.”
“There are excise taxes and VAT on oil ... excise taxes, duties, and VAT on vehicles,” he noted, adding that “today, 50 percent or thereabouts of vehicles are unregistered.”
“[I]f you impose higher taxes, maybe more vehicles will not register, right? So, I think we have to temper some of these increases because, like I said, they’re also inflationary,” he added.
“It’s all about timing as well. So, we’re looking at all this, all the tax proposals, and more or less, we’re almost done with them,” he added.
Taxes on junk food and sweetened beverages that were previously recommended by the Finance and Health department have been scrapped and will no longer be pursued.
“[W]hen I got to the DoF (Department of Finance), it had already been scrapped, and I’m not considering it,” Recto said.
Economic managers have set a P4.3-trillion revenue target for this year. Of this, P3.04 trillion will have to be collected by the BIR, while the BoC needs to net close to P1 trillion.
“Recognizing the current economic challenges, we must not rely solely on imposing new or additional taxes,” Recto said.
“We must also concentrate on optimizing the BIR and the BoC’s performance through creativity, transparency, and efficiency in tax and customs administration.”
He said the plan is to boost revenues by 15 percent this year under a fiscal consolidation plan that will also include reforms to the military and uniformed personnel (MUP) pension system that is currently being solely funded by the government.
Recto said he supported proposals that only new members be made to contribute, contrary to Diokno’s view that all existing beneficiaries should do so.
“My personal stance is the same as the position now in the Senate. The government has a social contract with
our MUPs. And based on the law, we promised them a certain pension,” he explained.
“... I think the government should respect that. What we can do for the reform is that all new entrants, for example, [by] January 1, 2025, will have a different pension system similar to what civilians have,” he added.
Despite concerns of rising government debt given the need to fund a perennial budget deficit, Recto said, “it’s your ability to pay that is important.”
It’s not the size of the debt, but your ability to pay. Nominally, the debt looks high. It’s P14.5 trillion, roughly 60 percent of GDP (gross domestic product), but which is very manageable,” Recto said.
The goal is to lower the ratio to 5155 percent or by around 1.0 percent annually, which he said can be realized via higher taxes, a combination of methods, or higher economic growth.
“I think we’re on track to bringing that debt-to-GDP ratio down. But I don’t think we should sacrifice growth in the process,” Recto added.
“I think the best way to grow the economy, or the best way to raise revenue, is to grow the economy and to expand the tax base. So we will endeavor to do that.”