The Philippines needs to keep pursuing tax reform measures pending in Congress en route to its plan to narrow its yawning budget deficit, according to the World Bank.
In its Philippines Monthly Economic Developments report for October 2024, the World Bank noted that the fiscal deficit as a share of gross domestic product (GDP) narrowed to 5.1 percent as of end-September from 5.7 percent during the same nine-month period last year as revenue collection growth outpaced the rise in public spending.
The Cabinet-level Development Budget Coordination Committee (DBCC) targets a smaller 2024 budget deficit equivalent to 5.6 percent of GDP than the 6.2 percent in 2023.
The World Bank cited that government revenues during the first nine months of this year were boosted by surging non-tax collections, especially from government-owned and/or -controlled corporations (GOCCs), whose mandatory dividend remittances were hiked to 75 percent this year from 50 percent previously.
Nearly doubling of other non-tax take, including from privatization, jacked up the share of public revenues to GDP by one percentage point at the end of the third quarter, the Washington-based multilateral lender further noted in its Oct. 31 report.
To recall, end-September non-tax revenues benefited from a one-off windfall thanks to the privatization of the country's main gateway Ninoy Aquino International Airport (NAIA), whose San Miguel Corp. (SMC)-led private proponent remitted in September its P30-billion upfront payment to the Manila International Airport Authority (MIAA).
"Programmed tax revenues are also largely on track, supported by adjustments in excise taxes from previous legislation and efforts to improve tax administration through implementation of the Ease of Paying Taxes Act," the World Bank said.
"Among the priority tax reform measures this year, Congress has passed the value-added tax (VAT) on digital service providers (DSPs) and reforms to real property valuation," the lender added.
Still, "several measures are still pending approval and remain important to enhancing fiscal sustainability," the World Bank pointed out.
Among these pending tax reform measures included slapping tax on single-use plastics, updating the motor vehicle user's charge (MVUC), mining fiscal regime rationalization, as well as the proposed Capital Market Efficiency Promotion Act (CMEPA) carved out of the previous Duterte administration's Passive Income and Financial Intermediary Taxation Act (PIFITA) proposal.
However, the Department of Finance (DOF) earlier expressed concern about its estimates showing that CMEPA would cost the government foregone tax revenues totaling P140.1 billion in the next four years, reversing the additional revenue collections expected from PIFITA bills of between P7.5 billion and P10.8 billion.
Manila Bulletin's sources had disclosed that legislators in the Lower House are no longer keen to reinstate excise tax on pick-ups trucks, which forms part of PIFITA but was removed in the House-approved CMEPA.
According to the DBCC's 2024 Mid-Year Report, the Marcos Jr. administration wants to raise more non-tax revenues due to a projected shortfall in tax collection this year, to P3.8 trillion, from the P4.1-trillion original program.
"An expected shortfall of approximately P253.3 billion will come from tax revenues, with both the BIR [Bureau of Internal Revenue] and BOC [Bureau of Customs] falling below the original targets by P197.8 billion and P60.5 billion, respectively," the DBCC said in its Sept. 30 report.
"To compensate for the shortfall in tax revenues, the projections for non-tax revenues were revisited and additional revenue sources were identified to help ensure sufficient fiscal space," according to the DBCC, which now targets a bigger non-tax take of P449.6 billion this year from only P199 billion previously.