Group: PHL to focus on improving tax collection

The world’s only global association of financial institutions sees the Aquino administration focusing on improving tax administration and collection, considering that no new tax measures are expected next year. “No major new tax programs are envisaged for next year, suggesting that the government intends to remain focused on efforts to improve tax administration and collection," stated Washington-based Institute of International Finance Inc. (IIF) in a research note titled “Philippines: Fiscal Correction on Track." The IIF noted that the Department of Finance (DOF) sees government taxes increasing to P1.445 trillion or 14.1 percent of GDP next year from P1.273 trillion or 13.6 percent t of GDP this year and spending rising to P1.842 trillion or 17.9 percent of GDP from P1.711 trillion or 18.3 percent of GDP. “There can be little doubt that insufficient fiscal support for social programs and infrastructure development has impeded growth and development," the IIF said, considering that the low tax effort would be inadequate for a middle-income economy such as the Philippines. “The government’s success in containing and reducing the budget deficit is to be applauded, but the structurally low tax incidence threatens to undermine fiscal sustainability over the longer run," IIF said. The IIF suggested that the Aquino administration put in place new tax measures starting 2013 to ensure fiscal sustainability over the longer term. “The government is mindful of this shortcoming and has indicated that new revenue-raising initiatives will be forthcoming in the 2013 budget," IIF said. The DOF has committed to trim the budget deficit to about 2 percent starting 2013 until the end of the term of President Aquino in 2016. The country’s budget deficit grew last year to a record P314.4 billion or 3.7 percent of GDP from P298.5 billion or 3.9 percent of GDP in 2009. IIF said last year’s strong economic growth had GDP expanding by 7.6 percent — the strongest in 34 years — and resulted in the government managing to control the country's budget deficit. IIF added that the country's GDP growth would likely slow down to about 5 percent this year and next year. “Meeting the deficit reduction target over the near term will continue to be achieved by calibrating expenditures with revenues," IIF said. “In the meantime, budget control has helped maintain macroeconomic balance and foster growth. While high oil prices and the gradual tightening in monetary policy are likely to moderate the strong performance evident at the beginning of the year, real GDP is set to grow by 5 percent annually this year and next," IIF added. —MRT/VS, GMA News