The passage of the comprehensive tax reform program is positive for the country’s credit rating provided there will be no dilution in revenues, Swiss financial services company Credit Suisse said in a report over the weekend.
“Latest tax reform bill [is] positive for credit rating. We believe what matters most from the credit rating agencies’ perspective is the revenues generated over time, and not just one year’s revenues,” Credit Suisse said.
It said while the revised version of the bill implied that some revenues would be back-loaded, the total tax receipts generated by 2020 would be actually quite similar.
“We estimate that with the additional tax reform revenues, the government can raise spending by 1 percent of GDP while still lowering overall government debt metrics. We see a good likelihood that Fitch will upgrade the Philippines to BBB, from BBB- [positive], if the tax reform bill eventually passes as it is written,” it said.
Credit Suisse warned that a significant dilution of revenues could be negative for credit rating and infrastructure push. The bill is now headed to the Senate, where it could face more resistance, after the House passed the bill last week.