MANILA, Philippines – Sen. Sergio Osmeña III is supporting the call of the Department of Finance to review the numerous tax breaks granted by Congress over the past two years.
The tax breaks granted in 2009 and 2010 cost the government over P100 billion in revenues.
Osmeña, who won a fresh mandate during last May’s elections after his term ended in 2007, said that Congress made a mistake by granting too many of what he called “idiotic tax exemptions” in the last two years of the Arroyo administration.
“What I am saying is that if we give tax exemptions to everybody who feels they deserve a tax exemption, we will end up eating, eroding the revenue base of government,” Osmeña said during a weekly forum at the Senate.
The DOF previously noted that a total of P62 billion in tax breaks were granted in 2009 and another P46 billion were given this year.
Finance Undersecretary Gil Beltran said that the P108 billion in lost revenues because of the tax breaks was too much.
The government is struggling to find new revenues to finance its expenditures and cover the budget deficit, which is projected to reach P325 billion this year.
Among the revenue reduction measures that were granted by Congress were the lowering of the corporate income tax from 35 to 30 percent (P15 billion to P20 billion annually), exemption of minimum wage earners from income taxes (P26 billion), the imposition of franchise tax on power transmission in lieu of all national and local taxes (P9 billion), Personal Equity Retirement Account Act (P7 billion), National Tourism Act (P3 billion) and the Expanded Senior Citizens Act (P1.7 billion).
Osmeña argued that Congress cannot just grant exemptions to all sectors asking for this and that it should always study the revenue implications of the grant of these incentives.
“You cannot seek too many exemptions because it makes the system more inefficient. The tax incentives given to big corporations should only be given if the big corporations are still not here (meaning new investors),” Osmeña said.
He said that the impact on revenue generation of the tax exemptions also has an impact on the kind of service that the government provides to the people.
Osmeña lamented that a lot of the competent professionals in the government are leaving public service for higher salaries from the private sector or overseas because it cannot afford to pay more to these people.
According to the DOF, the removal of all these unnecessary tax breaks could provide much needed revenues for the government and take away the pressure to impose new tax measures.
The Aquino administration has been hesitant in imposing new tax measures and would like to focus instead on tax collection efficiency and curbing smuggling to generate more revenues.
However, if the two-pronged approach fails to generate the targeted revenues, then the government would have no choice but to introduce new tax measures.