|Written by IBON Media|
|As government fails to resolve its fiscal crisis in 2008 and faces a severe deficit problem, the prospect of more burdensome taxes and shrunken social services looms in 2009, says research group IBON Foundation.
The Philippine government, like last year, will scramble to raise revenues in the quickest way possible. This deficit scenario has nothing to do with the global crisis and is due to the government’s poor revenue performance and distorted spending priorities.
Increasing the tax burden on the people is crucial for the Arroyo government. Last year, oil price increases have resulted in a de facto new tax burden of over P19 billion– or the oil price-induced “windfall” gain in tax revenues– bringing RVAT take on oil up to around P80 billion for the whole year.
This year, the administration is aiming to put an additional tax burden of P12-25 billion through a uniform excise tax on tobacco and alcohol products, or the so-called sin taxes. It is also possible that the “rationalization” of fiscal incentives, by restricting tax- and duty-free incentives to exporters and big-ticket investors, will effectively add to the tax burden of domestically-oriented Filipino small and medium enterprises (SMEs).
In 2008, the administration has failed to improve revenue collection, where total revenue growth of 8.1% in the January-August 2008 period has been even slower than nominal year-on-year growth in gross national product (GNP) of 12.5% in the first semester. This is far short of the 13.5% rate, without privatization, targeted for 2008.
It is also not far from the 8.2% average annual revenue growth rate in the pre-VAT period 2000-2004. This implies that there has been virtually no improvement in revenue efficiency and that increased revenues have been due largely to the imposition of the regressive VAT and one-shot privatization.
The government is not addressing the most important sources of deficit pressures (i.e. revenues undermined by corruption and liberalization, unproductive debt service, etc.) and stubbornly continues to target a balanced budget at the expense of heavier burden for the Filipino majority. (end)