RP needs efficient collection, new tax measures

President Benigno Aquino III should make tax collection more efficient and introduce new tax measures to help raise much-needed revenues in trimming the country's record budget deficit, experts said in a paper on economic policy. In a policy monograph called Economic Reforms for Competitiveness, experts said that the new tax measures could be delayed but not avoided as the improvement of tax administration by the newly installed Aquino administration would not be enough to bring down the government's huge budget shortfall. The monograph was prepared by the UP Open University, Code: RED (Reforms for Economic Development), representatives from the executive and legislative branches of government, the academe led by the UP School of Economics and National Center for Public Accountability and Governance, and business groups like the Philippine Chamber of Commerce and Industry and the Capital Market Development Council. The paper showed a list of revenue-enhancing measures, including the rationalization of fiscal incentives, the legislation of fiscal-responsibility bill, the reform of existing excise-tax structure for tobacco and alcohol products, and the simplified net income taxation scheme for professionals and self-employed. Tax incentives should focus on exports, strategic projects, and domestic investments in the 30 poorest provinces, while the redundant instruments with performance-based types of tax incentives, including accelerated depreciation, and longer carry over of losses, double deduction of training or research and development should be replaced, the policy paper prescribed The value-added tax relief for exporters should be efficient and equitable and that the new fiscal incentive package should be applied uniformly to all prospective investments, the paper showed. The current multi-tiered excise-tax system is ineffective as a source of revenue and as a tool to curb consumption of sin products particularly cigarettes and liquor, according to it. Instead, these supported the findings of former Budget Secretary Benjamin Diokno that the ad valorem system of taxation is superior to the specific taxation being implemented by the Finance Department. Experts stressed that the new administration would need revenue-enhancing measures as it could not afford to allow the budget deficit to balloon further. The country's budget deficit swelled to a record P298.5 billion or 3.9 percent of the gross domestic product last year from P68.4 billion or 0.9 percent of GDP in 2008 as the country absorbed the impact of the global economic meltdown. This eclipsed the previous record of P210.7 billion or 5.3 percent of the GDP booked in 2002. The Aquino government should be given the opportunity to improve tax administration before introducing new tax measures, Diwa Guinigundo, deputy governor of the Bangko Sentral ng Pilipinas, said. "I think we should give the administration the opportunity to improve tax administration and really improve tax collection before considering any new tax measure," Guinigundo pointed out. The new government could also review the possible introduction of new revenue-enhancing measures to put the country's fiscal house in order. "The second solution is to improve tax administration and review the possible tax measures. Maybe sooner or later they will have to review it." Guinigundo said. —Jesse Edep/VS, GMANews.TV