The Philippines: Marcos’ planned new taxes may have limited impact

• THE ECONOMIC TEAM’S plan to pursue new taxes on digital services and pollutants, as well as “rightsizing” of the bureaucracy, may not generate enough revenues needed to repay the Philippines’ ballooning debt, experts said.
• Finance Secretary Benjamin E. Diokno last week said they are considering the imposition of taxes on digital or online transactions, single-use plastics, and carbon emissions. This as the Marcos administration looks for new sources of revenues to lower the fiscal deficit and repay the PHP3.2tr additional debt incurred during the coronavirus disease 2019 (COVID-19) pandemic.
• Bernardo M. Villegas, economist at the University of Asia and the Pacific, said these additional taxes “will not be enough but they will contribute to reducing the fiscal deficit.”
• The Bureau of the Treasury (BTr) earlier estimated the government needs to raise PHP249bn annually in incremental revenues to avoid new borrowings and repay debt.
• “Given the amount of plastics, carbon and online services that are being used, this can bring in a sizable amount. This may not be enough to pay for the debt, but its consequences in terms of the environment and the inequality are probably more important than reducing the debt,” said Leonardo Lanzona, director of the Ateneo Center for Economic Research and Development.
• Under the previous administration’s fiscal consolidation plan, a PHP20 excise tax per kilogram of single-use plastics would generate PHP1bn in revenues annually.
• A 12% value-added tax on online advertisement services and other digital and online services would also generate PHP13.2bn in annual revenues.
• Several senators backed the proposed tax on single-use plastics and online transactions.
• In a Viber message, Senator Mary Grace Natividad S. Poe-Llamanzares said taxing single-use plastics would hopefully discourage people from using these, and lessen their impact on the environment.
• Also, Senator Ramon B. Revilla, Jr. said Congress should review and update its existing tax laws on the digital economy.
• The House of Representatives approved in Sep 21 a bill seeking to impose a 12% VAT on digital sale of services such as online advertisements, subscription services, etc. However, the Senate did not approve the counterpart measure.
• Meanwhile, Senator Francis Joseph G. Escudero said that it may not be the best time to implement the two proposed measures.
• Mr. Escudero suggested that Mr. Diokno focus on plugging tax loopholes and improving revenue collection by the Bureau of Internal Revenue and Bureau of Customs.
• Economic managers are also pushing for the passage of a government rightsizing law that would eliminate redundancies and duplication in government operations.

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