CEBU, Philippines - Outgoing Finance secretary Margarito Teves is preparing to re-open his consultancy agency, Think Tank Inc., after the new Department of Finance (DOF) secretary is sworn into office this week.
Teves, who was in Cebu over the weekend as one of the main speakers in the culminating activity of the 19th Visayas Area Business Conference held at the Cebu City Sports Club.
Teves, however said that before he vacates the DOF office, he still needs to present his report as well as recommendations to the incoming finance secretary. He added that he presumes that former trade secretary Cesar Purisima will be taking over the reins in the finance department as he was ordered to turn over the office to Purisima. In fact, Teves said he has a scheduled meeting with Purisima before the Presidential inauguration on June 30.
Teves’ consultancy company, the Think Tank Inc., has been a “shell firm” after he was appointed as Land Bank of the Philippines (LBP) president few years back, and later on chosen as the DOF secretary under the Arroyo administration.
The consultancy firm will focus on providing management services to economic and political fields, Teves said he is now forming a new group of experts, as he is also planning to partner with different foreign financial institutions, such as Asian Development Bank (ADB), among others.
“I have to earn a living,” Teves said as under the law, they cannot work under a government post for one year.
One of the many recommendations Teves is set to present to Benigno “Noynoy” Aquino III’s administration, is the option to accommodate the proposal to increase the VAT (value added tax) from 12 percent to 15 percent on a very staggered basis.
“Hopefully the new administration will consider this,” Teves said explaining that this proposal is one of the soundest economic bolster, while it offers incentives and pay-back guarantee to the poor, under a “conditional cash transfer” concept.
Teves, who is regarded as the wiz in economic management field, that helped cushion the Philippines from the impact of the global economic downturn, said that the new administration should consider a lot of options on how to sustain the economic momentum of the country, as well as further reducing the state’s deficit.
“It’s unfair to the president to be given only one option. But it’s still his decision. It’s a judgment call," he said, while the upcoming Aquino administration vowed not to impose additional new taxes.
Teves stressed that the new government should raise (at least) P94 billion in fresh revenue, or impose other revenue generating or cost cutting measures, in order to bring down the budget decifit to 3.3 percent of Gross Domestic Product (GDP) by 2011.
A possibility of increased deficit to four present of GDP is expected, if no sound measures will be implemented, thus one easy option is for the government to result to borrowing.
This year’s deficit which is equivalent to four percent of GDP still manageable, he said but what is important is for the new government to go back to the path of fiscal consolidation.
A roadmap should be put in place, and the Philippines should learn from the debt-relation problems faced by other countries like Italy, Greece, Spain Portugal and Ireland.
The current deficit target is 3.6 percent of GDP. Teves hopes that the Aquino government would consider the several recommendations.
Aside from increasing the VAT rate, Teves’ other recommendations include approval of the simplified net income taxation system for individuals; rationalization of fiscal incentives; restructuring of excise taxes on tobacco and alcohol products and indexing these to inflation exemption of the tax and customs bureaus from the salary standardization law: a two-rate excise tax system for petroleum products and the removal of exemptions; a taxation reforms in the financial sector; and the auditing of revenue collections, on top of the disbursements, of the national government.