DOF hints at new taxes, economists push back

While the Department of Finance (DOF) seems to be shifting away from its earlier stance of “no new taxes,” private sector economists argue that new tax measures are not yet necessary, emphasizing the need to first strengthen the implementation of existing tax laws.

- BY DERCO ROSAL

“I can’t emphasize more the need for the government to simply improve tax collection as this improves tax efficiency without further burdening the economy with more taxes,” said Patrick M. Ella, economist at Sun Life Investment Management and Trust Corporation (SLIMTC).

Ella believes the government should not impose fresh taxes for now because there is still room to improve how taxes are collected. He noted that “on a tax collection efficiency basis, there are still more areas of improvement.”

According to Ella, the country’s tax-to-gross domestic product (GDP) ratio remains below the World Bank’s recommended 15-percent threshold, which is considered necessary to support sustainable development and fund essential public services.

Citing historical trends, Ella said that the Philippines nearly attained the 15-percent tax-to-GDP target in the late 1990s, but the ratio declined after the Asian Financial Crisis (AFC) and has only gradually improved since then.

“So may I suggest—it makes more sense to improve collection than to impose new tax revenues, as this is the more efficient solution,” he said.

Rizal Commercial Banking Corp. (RCBC) chief economist Michael Ricafort also said the government should prioritize boosting recurring tax revenues by strengthening enforcement of existing tax laws, including efforts to go after tax evaders.