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Warning To Maintain Philippines Tax Revenue Push

by Mary Swire,, Hong Kong

09 September 2014

The Department of Finance (DOF) has warned that the proposed legislation currently being considered in both the Philippines Senate and House of Representatives, which would reduce both corporate and individual tax burdens, could threaten the Government's efforts to increase revenue and reduce its fiscal deficit.

For the first half of 2014, it was disclosed that the Philippines recorded a total revenue to gross domestic product (GDP) ratio of 15.6 percent, marking an increase from 15.3 percent in the first six months of 2013 and 13.8 percent in the same period of 2010. The fiscal deficit in the first six months of the year has been brought down to 0.9 percent, well within the Government's annual target of 2.1 percent.

Both revenue and tax collections have outpaced the 9.2 percent nominal GDP growth rate for the first half of the year, with total revenues up 11.2 percent year-on-year and tax revenues higher by 10.5 percent.

"Coming on the heels of the news that we beat expectations with a 6.4 percent GDP growth increase in the second quarter of this year, our tax and revenue to GDP numbers show that our resolve to sustain this growth is ever stronger," Finance Secretary Cesar V. Purisima said. "By committing to keep up the sound performance of our revenue-generating agencies and push through with our legislative agenda, I believe we are on track to meet our tax and revenue goals for the year."

The Government's key revenue-enhancing legislative priorities include a rationalization of fiscal incentives and of mining sector taxation, while the bills proposed in Congress recently would cut individual and corporate tax rates. The DOF has pointed out that any revenue loss would be harmful, particularly in the country's present fiscal deficit situation and with much funding needed to fund reconstruction following typhoon Yolande.

"There is still much room for improvement to achieve our goal of a 16.6 percent tax effort in 2016," Purisima added. "However, these efforts are at risk by certain tax-eroding measures pending in Congress. We call on our colleagues in Congress to advocate for fiscal responsibility to assure we do not fall back into the vicious cycle of fiscal erosion and slow growth which we have worked hard to get out of."

TAGS: Finance | tax | economics | fiscal policy | law | Philippines | ministry of finance | legislation | revenue statistics | legislation amendments

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