An economist legislator has urged the government to consider borrowing money to “narrow the country’s budget gap amid the economic downturn caused by the pandemic,” and for Congress to pass fresh revenue measures to pay these debts back.
House Ways and Means Chairman Albay Rep. Joey Sarte Salceda noted that the country’s budget deficit for the first five months of 2020 has reached P562.2 billion, nearly 695 times the previous year’s budget gap of only P809 million for the period.
The Bureau of Treasury reported that government disbursements have continued to increase to P1.665 trillion, while revenues shrank to P1.102 trillion by end of May. A budget deficit occurs when expenditures exceed revenues.
Citing several revenue measures now pending in Congress, Salceda said they can pass these proposals to boost the Philippines’ credit ratings and make loans cheaper. The proposed tax on digital economy – which he recently filed – is estimated to yield P29.1 billion annually in incremental revenues, while the taxes on POGO, or Philippine Offshore Gaming Operations, will give the government P45 billion annually.
HB 6765, titled An Act Establishing a Fiscal Regime for the Digital Economy, aims to better capture the value created by the digital economy in the country’s tax system, and plug loopholes caused by ambiguities as to what kind of taxes digital services are liable to.
The proposal will make Lazada-like e-commerce platforms as withholding agents for VAT on imports from their seller-sources, mostly overseas-based; and require digital services providers like Google, Facebook and Netflix to be domiciled before offering their services so they become subject to value added tax and corporate income tax.
The bill seeks to amend Sections 57, 105, 108, and 114 of the National Internal Revenue code. Salceda also said the proposed Motor Vehicle Road Users’ Tax bill which he had also authored and filed last year, will earn the government P205 billion in additional revenue in five years.
“I would advise the government to…spend what we need now, whatever it takes for the country to survive Covid-19 and its impact on poverty and unemployment, and borrow if we must. We should borrow now, otherwise, balance sheet problems, when neglected, tend to get worse over time,” he stressed.
Salceda pointed out that the deficit is added to our national debt. “Now, you should consider two questions when you discuss national debt. Do we absolutely need to borrow; and can we pay for what we borrow?, he explained.
“The first question is an obvious reality. We need to borrow, as do many other countries in the world. Even countries with strong non-tax sources like Singapore, with its own sovereign wealth fund, is borrowing immensely for Covid-19. The second issue requires more commitment, although in the case of the Philippines, the situation is much easier than it would be in, say, an aging country like Japan,” he added.
Salceda said he is willing and ready to sponsor all the revenue measures any time the leadership sets the date. “We will have to do tax policy and administration reforms like the revenue measures we are proposing—digital tax administration, POGO taxes, updated road users’ tax—to help narrow the gap,” he said.
“We are undergoing technical working group discussions on digital taxation, and the POGO and road users’ tax measures have already been approved by my committee,” he added.