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THE Department of Finance supports the International Monetary Fund’s (IMF) recommendation that the Philippines adopt a more ambitious revenue plan to increase funds for social spending.
“This will help attain the government’s goal of poverty reduction and enhance the country’s response to natural disasters while staying on course with the fiscal consolidation path to 3.0 percent by 2028,” Finance Secretary Benjamin Diokno told reporters on Friday.
Revenues totaled P310.6 billion in August, P21.9 billion down from the previous year’s P332.4 billion, while the P443.6 billion in spending was P39.1 billion higher than the year-earlier P404.5 billion.
The eight-month tally of P2.6 trillion marked a 9.03-percent increase in revenues compared to the previous year’s P2.4 trillion.
According to the Philippine Development Plan, the government aims to reduce the poverty rate to 16.4 percent this year, and further decrease by 13.2 percent by 2025. Economic managers want to bring it down to 9.0 percent by 2028.
The IMF, Diokno said, had suggested simplifying exemptions to expand value-added tax (VAT) and corporate income tax (CIT) revenues.
“The IMF will support this measure by providing technical assistance on tax expenditure assessment and VAT diagnostics,” he added.
“It (the IMF) also proposed to evaluate the implementation of the Corporate Recovery and Tax Incentives for Enterprises (Create) law and incentivizing investment through expensing of capital spending,” Diokno continued.
Under the Create law, small and medium-sized enterprises now have to pay a lower corporate income tax rate of 20 percent, down from 35 percent previously.
Large corporations with taxable incomes of over P5 million also benefit from a reduced rate of 25 percent, down from 30 percent.
Additionally, the law offers incentives to registered firms and projects such as income tax holidays, special corporate income tax rates, improved deductions, exemptions from import duties on certain materials, and VAT zero-rating on local purchases.
“These reforms are being complemented by digitalization and modernization efforts of the DoF and its attached agencies to help boost revenue collections and improve the delivery of services to the public,” Diokno said.
He added that the Digitalization Transformation Roadmap would make the Bureau of Internal Revenue data-centric while the Philippine Customs Modernization Program at the Bureau of Customs will upgrade their systems and streamline trade processes.
He also mentioned that the IMF would be offering technical assistance in evaluating the tax administration system’s performance through the Tax Administration Diagnostic Assessment Tool to identify areas for improvement.
The IMF is currently providing technical assistance with regard to the Comprehensive Adaptive Expectations Model (CAM) in collaboration with the DoF and the Department of Budget and Management.
The CAM is used for forecasting specific economic indicators by analyzing the alignment of the real, external, fiscal and monetary aspects of the Philippine economy.
“This tool can help in enhancing the macroeconomic estimates of the government that are being used for fiscal policy decisions,” Diokno said.
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