IMF urges RP to approve pending tax measures

MANILA, Philippines – The International Monetary Fund (IMF) is urging the Philippine government to pass pending tax measures to support its spending program despite the onslaught of a global recession.

The IMF said Congress should pursue the pending proposals to rationalize fiscal incentives and the imposition of additional taxes on alcohol and tobacco products.

As part of the economic stimulus package, the government also proposed fiscal relief on certain tax measures such as the additional deductions from taxable income of self-employed individuals such as businessmen and professionals – sectors that have less need for such relief.

On the other hand, the IMF is pushing the Arroyo administration to raise its revenue to fund the fiscal spending plan that includes infrastructures, public investments, social transfers such as conditional cash transfer scheme, and higher spending on education and health.

IMF resident representative Dennis Botman said while the measures to raise certain taxes in the middle of the global recession might seem untimely, he pointed out that these measures have the least disruptive effects on economic growth.

“These particular taxes we have in mind have the least effect on growth,” Botman said. “They will be necessary to finance higher spending while at the same time containing the budget deficit.”

The budget deficit in March reached P53 billion, largely a result of dwindling revenue collections and increased spending.

In its latest World Economic Outlook, the IMF said there was “considerable evidence” that public investment had a larger effect on economic activity than revenue measures.

Revenue collections last year reached only P235.4 billion, a level far off the P251.8 billion target, mainly due to the decline of the economy.

Sin tax collections levied on alcohol and tobacco reached P47 billion last year.

Last January, the government approved a fiscal stimulus package that included a P36-billion budget allotted on tax relief for the middle-class. The stimulus, implemented in March, encouraged the increase in the take-home pay of minimum wage earners. - Divina Rosa Natanauan