More subsidies, more taxes

Any new or revised tax measure by the Marcos administration is meant to replace revenue lost if Congress grants subsidies or scraps certain taxes.

This is according to Finance Secretary Frederick Go, who also said that he prefers reducing expenditures over imposing new taxes.

Sec. Go explained this recently during a hearing at the House of Representatives:

“Our total expenses are already at P6.8 trillion. We have a P2-trillion deficit that the Bureau of the Treasury will have to fund,” he said.

He noted that if there are certain taxes or certain subsidies that Congress would like to give, and certain taxes that Congress would like to remove, the government, through the Department of Finance, would have to find alternative sources of revenue.

This way, the government would be able to continue funding its operations, programs and projects, especially those in education, health, agriculture, infrastructure and peace and order.

“We would have to find replacement sources of revenue to fund those expenditures. Having said that, it’s our job to collect the taxes that we’re mandated to collect. We have to borrow the money that is missing, or (fund) the gap,” Sec. Go said.

In short, the finance chief said that every time we remove something, a replacement source of revenue needs to be introduced.

And this is bound to happen because amid the crisis, our lawmakers are quick to resort to populist measures – ayuda, ayuda and more ayuda, while at the same time moving to scrap taxes on oil.

Yesterday, President Marcos announced that the excise tax on LPG and kerosene is suspended on the back of skyrocketing pump prices.

Sec. Go said the DOF is studying its options and eyeing to implement eight different taxes that can help improve the country’s revenues.

One is the global minimum tax, which is a tax on foreign corporations doing business all over the world.

“Based on our computation, this is perhaps the single largest source of additional revenue for our coffers that is actually neutral, meaning it does not affect foreign direct investors in our country,” Go said.

Cut the fat

He was quick to stress that he does not want to impose new or revised taxes and prefers to reduce expenditures, which is also what the DOF is working on.

This is a good move because, as I said in previous columns, there are so many leakages that the government needs to plug.

For one, the bureaucracy is still bloated despite plans in the past to rationalize the system, remove redundant functions and make operations more efficient.

Enter a frontline government office and you would see rows and rows of tables with officials behind the desk and yet, you still have to spend the whole day in a snaking queue just to accomplish what you need to do.

I’m sure that if the government implements a serious rationalization of operations, introduces automated and improved systems and looks into key areas where manpower can be reduced, it can unlock billions in savings.

MUP pension a ticking time bomb

There’s also that pension for uniformed personnel. I have pointed out before that the so-called pension system of the military and other uniformed personnel (MUP) continues to require a hefty amount of the state’s funds.

The annual budget is more than P200 billion and is shouldered entirely by taxpayers. As of now, our military and other uniformed personnel continue to enjoy the benefits of a pension system even without any contribution into the fund. And this is what makes it unsustainable.

I also think billions in subsidies are wasted on agencies or government offices where corruption is rampant.

I’m sure there’s a lot of room to reduce funding support extended to the different agencies. Instead, they should be required to increase dividends they remit to the national government because in some cases, the excess funds are just spent on projects that may give them kickbacks – from all sorts of office giveaways to new logos.

I told Sec.Go that I really hope the leakages due to graft and corruption are addressed before any new or revised taxes are implemented.

Speaking of budgets, a reader suggested that government agencies that generate revenue should no longer get any support from its parent department.

“May I suggest that government agencies like the Land Transportation Office – they collect payments from car registrations, driver’s license, etc – should not be given a government budget anymore. They should be self-sufficient. The same goes for all agencies that generate income.”

Tax amnesty

And while the government looks for new revenue sources, some are pointing to a more practical solution: give taxpayers a clean slate.

Another reader sent this:

“I am Toribio Casiño of Bukidnon, dealing with land sales in our area. I wish to solicit your help regarding the delayed passage of another estate tax amnesty law for 2026 to 2028, which seems to have been overlooked by our financial managers. FYI, the bill is still with the Senate committee of Sen. Pia Cayetano, chairperson of the ways and means committee, and when enacted and signed by President BBM, would be a big help in addressing the government’s funding deficit due to the present crisis. On our side, landowners could also move on and finally actualize plans to resolve issues related to land ownership hurdles.”

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