MANILA – A top economic manager of President Benigno Aquino III on Monday stressed need to find new revenue sources before thinking of lowering income tax rates so as not to affect the government spending particularly on the infrastructure projects.
During the Senate deliberations on the proposed Php7.05 billion budget of the National Economic Development Authority (NEDA) and its attached agencies, NEDA Secretary-General said proponents of the bill lowering income tax rates should not assume that everything will turn out right once it is passed into law.
”It will not turn out right because our people are also looking for better infrastructure, better social services, better school and health facilities and so on,” Balisacan explained to the Senate finance sub-committee chaired by Senator Ralph Recto.
In fact, Balisacan said there is urgent critical effort on the part of the government to continue raising tax revenue effort “because we still have huge backlog in infrastructure, social services, and now environmental services because of climate change.”
”There are so much emerging needs and you just have to find sources of revenue,” he said.
Balisacan, however, admitted that he is in favor of simplifying the tax system “so that it is not regressive.”
”The current system is, although in the books it appears progressive, but the real actual situation is that it is regressive. It is the low income groups paying a higher. We would have to address that problem,” the NEDA chief said.
”We have to deepen tax base as you try to correct the inequities in the tax system,” he added.
Recto, meanwhile, believed that the government can find other sources of revenue to cover a Php30 billion that will be lost from the government coffers due to proposal to lower income tax rates.
He mentioned the Php30 billion that the Department of Finance (DOF), under its proposed 2016 budget, allotted to increase the capitalization of the state-owned Land Bank of the Philippines (LDB) and the Development Bank of the Philippines (DBP).
”We’re increasing the capitalization of the DBP and LBP which, I have looked at the financial of these two institutions, is not necessary. So that alone will pay for that already,” Recto explained.
Balisacan admitted that the Php30-billion subsidy for the LBP and DBP has not been discussed in the Development Budget Coordination Committee (DBCC).
Recto said the government has also Php500 billion that was not spent for the different infrastructure projects in 2014.
The senator said the tax measure to lower income tax rate can also help increase the domestic consumption amid the weak global economy which is predicted to last until 2020.
”We have proven that when I was NEDA secretary in 2009. We have financial crisis and prior to that we have reduced corporate income tax from 35 to 30 percent. That helped that we have no recession, among other things,” Recto said.
He said the economy will not be affected by the proposed tax income rate reduction since income earners will also use the money to buy basic commodities.
Recto said he intends to push for the passage of the income tax reduction bill, hoping that President Aquino will sign it into law after seeing its good effect to the economy.