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MANILA
needs to work harder on its falling tax-effort ratio if
it expects to attain its expenditure-driven balanced
budget program this year, the International Monetary
Fund said on Thursday.
At a
briefing at the Bangko Sentral ng Pilipinas, IMF
resident representative Reza Baqir said the ratio has to
rise, or there won’t be enough revenues coming in to
balance the budget or for allocation in the identified
priority areas of infrastructure and social services.
“The
tax-effort ratio determines the amount of additional
resources that government may devote for the priority
areas and achieve a balanced budget,” Baqir said.
He noted
that tax-effort ratio, which mirrors how well the
government collects the tax due, fell to just 14.03
percent of local output or the gross domestic product
last year versus 14.2 percent of GDP in 2006.
Both the
IMF and the government found it difficult to explain the
collection downturn that they variously attributed to
election-related tax evasion, discontent among tax
collectors, decline in compliance due to repeated
tax-amnesty programs, the lifting of the input
value-added tax cap, the strong peso and greater
smuggling activities at the various ports and airports.
Baqir
gave copies of the public information notice, or PIN,
that the IMF released as a consequence of its visit to
Manila in November last year under the annual Article
Four consultations.
The IMF
said a higher tax effort was needed even though Manila’s
fiscal accounts have improved significantly in recent
years.
It noted
the reforms implemented under the value-added tax system
had been short-lived no matter that the deficit has
narrowed.
While
the deficit may have been financed by asset-sale
proceeds just last year, “no progress was made in
reducing the debt-to-revenue ratio which is high
relative to other countries,” the IMF said.
Nonfinancial public sector debt was seen to fall over
the medium term, but will remain high at 43 percent of
GDP in 2013.
“While
the debt dynamics are favorable overall, they remain
vulnerable to shocks, especially to the exchange rate
and, to a lesser extent, growth,” the IMF said.
No new
tax measures have been introduced apart from the
proposed reduction in the minimum corporate income tax
in 2009.
It
sought an acceleration in tax administration reforms,
pegging of the sin tax rates to inflation and
rationalization of the universe of business tax
incentives to eliminate tax redundancies and encourage
more business activities. |
