By Beatriz Marie D. Cruz
THE National Government must consider the inflationary impact of any new taxes, analysts said, noting the heavy tax burden on the middle classes.
John Paolo R. Rivera, an economist at the Asian Institute of Management, said by phone that many “are still recovering in terms of their income generating prospects.”
Calling for greater efficiency in collecting existing taxes, he pointed to the need for “being mindful of taxation’s impact on those people who are actually driving the economy like the middle classes because (they’re the) heavily taxed portion of society,” he said.
“It is important for government to ensure that additional taxes do not hit the same group of people every time,” Eleanor L. Roque, tax principal of P&A Grant Thornton, said in a Viber message.
Ms. Roque said that the government should also “prioritize bills which improve taxpayer services or make paying taxes easier such as the bill on ease of paying taxes.”
Senator Sherwin T. Gatchalian, who chairs the Senate Ways and Means panel, said last month that the proposed Ease of Paying Taxes Act may be given committee approval before year’s end. A similar bill seeking to modernize tax administration and improve collection efficiency was approved by the House of Representatives last year.
Mr. Gatchalian also told DZBB radio on Sunday that the Senate is working on a measure allowing faster payment of real property taxes. The proposed Taxpayers’ Bill of Rights is currently being deliberated at the Senate, he added.
The senator also pointed to the need to address tax evasion via smuggling.
“Before we talk about increasing taxes, we must first discuss reforms that curb smuggling and easing payment of taxes,” he said.
Ms. Roque also called for measures that protect taxpayers from harassment or unnecessary hardship during the assessment or refund process.
The Development Budget Coordination Committee (DBCC) last month said it is pushing for three additional tax reforms to boost revenue, specifically an excise tax on sweetened beverages, the motor vehicle road user’s tax, and the mining fiscal regime.
“I agree in principle,” House Ways and Means Committee Chairman and Albay Rep. Jose Ma. Clemente S. Salceda said, referring to the proposed excise tax on sweetened beverages.
“I intend to file the administration version as soon as (the Finance department is) ready with it,” he said via Viber.
Finance Secretary Benjamin E. Diokno said an excise tax on sweetened beverages is expected to generate P53.7 billion in revenue in its first year of implementation.
Mr. Gatchalian said the tax would help fund health programs.
Ms. Roque added that “it is still a move in the right direction to tax unhealthy products to dissuade people from indulging in them.”
Mr. Rivera, however, noted that taxing a product in high demand, especially sweetened beverages, might fuel inflation further.
“(Sweetened beverages are actually) in demand… so it might fuel inflation because people would still buy it,” he said.
Mr. Diokno said that a modern vehicle road user’s tax will generate P15.8 billion in revenue during its first year and up to P48.6 billion by the third year.
“We will look into the impact on logistics and how to mitigate the price effects, since the highest increases in rates will be for trucks,” Mr. Salceda said, noting that motorcycles-for-hire and tricycles could be exempt from the motor vehicle charge.
Mr. Rivera said that a motor vehicle tax can help mitigate the road congestion problem.
“Traffic especially in urban areas is driven by the flow of and volume of vehicles and one way to curb this is through taxation,” he said.
The DBCC is also seeking approval of a new mining fiscal regime, which is set for discussion at the House Ways and Means panel this week. The proposed regime for the mining sector is expected to yield P12.4 billion in 2025, P12.9 billion in 2026, P13.4 billion in 2027, and P13.9 billion in 2028.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said that tax and other fiscal reform measures, alongside faster economic growth would help ease the Philippines’ debt-to-gross domestic product (GDP) ratio “to below the international threshold of 60% in the coming years and would help maintain or support the country’s relatively favorable credit ratings of 1-3 notches above the minimum investment grade rating.”
The Bureau of the Treasury puts the debt-to-GDP ratio at 61% as of the first quarter, higher than the 60.4% ratio at the end of 2021. The 60% threshold is the rule-of-thumb ceiling on debt levels considered manageable by developing countries.
“New taxes and higher tax rates need to be fair, equitable, and progressive, especially targeted to those that can afford them or those from the higher income brackets or at least prevent adding to the burden of the poor, the most vulnerable sectors, and/or those hit hard by the pandemic,” Mr. Ricafort said.