The Finance Department on Thursday warned that the failure of Congress to pass the whole package of tax reforms may result in a debt crisis and credit rating downgrade for the country.
Finance Secretary Carlos Dominguez III said if Congress would choose to pass only the tax package’s popular component”•the reduction in personal income tax rates”•without the corresponding revenue-enhancing measures, the country would be forced to rely on borrowings.
“Without improving on our revenues, many of our children will continue walking hours to get to school and our classrooms will continue to be packed beyond capacity. The poorest Filipinos will continue to have little or no access to health services. Our farmers will be unable tor raise their productivity and thus remain poor,” Dominguez said.
The first package of the comprehensive tax reform program submitted to the Congress in September under the proposed Tax Reform for Acceleration and Inclusion Act aims to generate a net gain of P174 billion, or equivalent to 1 percent of gross domestic product in 2018.
The initial package aims to make the tax system more progressive through the lowering of personal income tax rates to make these at par with those in the region, expanding the value added tax base by limiting exemptions to necessities such as raw food, education and health care, while increasing excise taxes on oil and automobiles.
The agency earlier said that if the PIT would be the only part of the package the Congress would pass into law, the government would lose about P180.3 billion in revenues.
“Along with this bleak scenario, the Philippines will most possibly suffer a credit rating downgrade as the government will be forced to rely on borrowings to manage the deficit, which means P30 billion in additional debt costs,” the agency said.
