World Economy

Philippine Economy Strong Enough to Take in New Taxes

Carlos DominguezCarlos Dominguez

The Philippine economy is “strong enough” to weather the impact of new taxes, which are necessary to fund a long-delayed infrastructure overhaul, Finance Secretary Carlos Dominguez said Tuesday.

Growth is robust, interest rates are low and the currency is relatively strong, giving the government an opportunity to impose excise taxes on diesel and gasoline, among others, Dominguez told businessmen in Davao City, ABS-CBN reported.

“Our economy is strong enough to take that hit. It’s not perfect, but it is a system that we need if we want to improve the infrastructure of our country,” Dominguez said.

“If you do not take advantage of that situation to change the tax situation, you are very irresponsible,” he said.

The new levies are meant to compensate for a reduction in personal income tax rates, which would be enjoyed by up to 90% of all taxpayers, he said.

While excise taxes on fuel could stoke inflation, Dominguez said this would affect mostly the rich or around 20% of the population who consume 60% of fuel in the market.

Dominguez said the government needs to raise up to P8 trillion ($164.4 billion) to build new roads, bridges, railways and airports in the next six years.

“The society needs to invest in infrastructure. If we are going to take that next step to middle income status and finally to high income status,” he said.

Nothing hard and fast yet about how much tax would be meted out on new vehicle sales, but if there is one rule the government should stick to, it is about not changing the rules midway such that the Comprehensive Automotive Resurgence Strategy program would be affected.

This is not, however, a categorical “no” to the proposed tax measure meant to offset part of the lost taxes resulting from the plan to reduce personal income taxes of a broader base of Filipinos, and the eventual reduction too of corporate income taxes.

  Budget Gap

The government posted a budget deficit of 75.3 billion pesos in September, the department of finance said on Tuesday, the biggest monthly gap recorded so far this year, AFP reported.

Expenditures grew 30% in September from a year earlier, while revenue rose just 1%.

That brought the budget gap in the nine months to September to 213.7 billion pesos. The government has a budget deficit ceiling of 388.9 billion pesos in 2016.

Philippine President Rodrigo Duterte has pledged to accelerate infrastructure spending during his six-year term, which began on June 30, to lift economic growth.

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