MANILA, Philippines - The country’s Finance chief has asked the support of lawmakers to pass a measure that aims to promote fiscal responsibility and to review the country’s tax incentive regime.
In a recent meeting with members of the House of Representatives’ committee on ways and means, Finance Secretary Cesar Purisima reiterated the importance of the proposed measure.
To be known as Fiscal Responsibility Bill, the measure will require a revenue component for every bill that has an expenditure component so that each measure that is passed becomes revenue neutral.
“The Fiscal Responsibility Bill is important because right now our fight in reducing the deficit is like being in a treadmill that’s going ever faster. You have to run ever faster. We have to make this treadmill constant and this treadmill is driven by laws that come out with due expenditures,” Purisima said.
He said without such measure, the government’s debt would just grow bigger and bigger.
“The Fiscal Responsibility Bill will require, if approved by honorable members, a revenue component for every bill that has an expenditure component so that each bill becomes revenue neutral. So then it buys us time to actually catch up because right now we’re falling behind and our debt is getting bigger. Therefore, we need to draw a line and this is a very important component,” he explained.
In the area of tax incentives, Purisima said the government should be smarter in providing incentives to investors.
“I believe in incentives. I believe in some cases, we need to give incentives to attract investors to come to the country,” he said.
At the same time, Purisima said the government needs to be smarter in granting tax perks to investors.
He noted for instance that in 1976, the government signed a Tax Treaty between the Philippines and the US that avoids double taxation.
“So when we exempt from income taxes in the Philippines US companies, we are actually just passing on the taxable income of the US when they’ll pay taxes on that income anyway. So in effect, the tax that we could have collected, we gave to the US,” he said.
This, he said, isn’t a very smart way of giving incentives.
“These types of things we need to adjust so that we can actually collect for ourselves what we deserve because the economic activity was actually done in the Philippines,” he said.
The government expects the budget gap to hit P325 billion this year or 3.9 percent of gross domestic product (GDP).