DOF Hopes to Generate ₱350 billion per Year from 2023-2027

On Wednesday, the Department of Finance (DOF) forwarded a three-package proposed fiscal consolidation and resource mobilization plan for the incoming administration. This includes the enforcement of several fiscal measures, such as taxes, which will aid the country to outgrow its debt without having to use borrowings. On average, the plan is projected to generate around ₱350 billion in revenues per year from 2023 to 2027.

Throughout the global pandemic, the government incurred ₱3.2 trillion in incremental debt. The Bureau of Treasury (BTr) furthered that the country must raise at least ₱249 billion per year in incremental revenues in order to pay for this debt. The plan is also set to address the long-term financial issues that may arise from the prolonged global pandemic alongside the ongoing conflict between Russia and Ukraine, according to outgoing Finance Secretary Carlos Dominguez III.

“The plan is doable and is designed to secure the gains that we have made under the Duterte administration and to ensure that the government can continue to make economic investments and pursue programs for recovery, maintain its high credit ratings, grow out of its debt faster, and cushion the Philippine economy from future external shocks,” explained Dominguez, noting that there may be “serious and spiraling consequences” if the next government does not pursue the plan.

Valery Joy Brion, the DOF’s Officer-In-Charge Undersecretary of the Strategy, Economics, and Results Group, echoed similar sentiments. Among the suggested fiscal measures include the expansion of the value-added tax (VAT) base and a possible cut in the VAT rate, which could generate close to ₱142.5 billion per year — accounting for 41% of the total annual estimated average revenue. “For the expansion of VAT base and the possible VAT rate reduction, we seek to limit VAT zero-rating to direct exports and to repeal VAT exemptions, except for education, agricultural products, health, financial sector, and raw food,” Brion furthered.

The government’s outstanding debt hit a new record-high as of end-March at ₱12.68 trillion due, in large part, to more borrowings amidst the global pandemic. The country’s debt-to-GDP ratio has also reached 63.5% — marking a 17-year-high since the 65.7% debt-to-GDP ratio under the Arroyo administration — which goes past the internationally recommended 60% threshold for emerging markets.

Source: BusinessMirror