Economist and Albay 2nd district Rep. Joey Salceda says that to pay off the country’s Covid-19 debts, the next administration will have to generate around P326-billion in yearly revenue.
As of January 2022, the Department of Finance (DOF) reported that the Philippines had incurred debt amounting to around $25.74-billion, equivalent to P1.3-trillion to fund the country’s Covid-19 response.
“If you annuitize the debt service due to deficit spending from January 2020 to March 2022, you will have around P144 billion in principal payments over the next twenty years, and around P181 billion in interest payments. That will of course vary per year, and some years will need lower debt than others. But if you want to stretch out the payment schedule, that’s the kind of fiscal space you need to cover the COVID-19 debts without incurring budget cuts,” Salceda said in a press statement on Tuesday, May 17.
“Obviously, budget cuts in aren’t a very good option if you want to sustain COVID-19 growth, and of course, borrowing more to cover past borrowings is a downward spiral to fiscal hell. So, you really need to expand fiscal space. And of course, the P326 billion figure relies on current interest rates. To keep them at this level, we need to show our creditors we are in good fiscal standing. So tax policy reform is really our best option,” he continued.
The next administration will most likely be lead by presumptives President Ferdinand “Bongbong” Marcos Jr. and Vice President Sara Duterte; the two candidates took about 58 percent and 61 percent of the vote respectively.
Salceda thinks that the “supermajority” favor for a Marcos administration will allow the incoming administration to enact necessary economic and tax reforms.
“(The) supermajority (for Marcos) in both mandate and Congressional alliances (will allow them) to enact smart, efficient tax and economic policies to address this debt overhang. It’s the biggest election victory since 1961, so I think there is plenty of political capital for difficult but necessary reforms,” the economist-solon explained.
He further explained that the incoming administration should start with a fiscal expansion program in its first 100 days to better protect “investor confidence, credit ratings, debt overhang, and future growth prospects.”
Specifically, he suggested: the strengthening of tax enforcement strategies implemented by the Arroyo administration such as the RATE (Run After Tax Evaders), RIPS (Revenue Integrity Protection Service), and RATS (Run After the Smugglers); and for the Bureau of Internal Revenue (BIR) to impose digital economy taxation, the “the creation of a transfer pricing service, and the ease of paying taxes reforms in the BIR processes.”