The government should adopt a balanced fiscal strategy that prioritizes both spending efficiency and the optimization of existing tax structures to ensure long-term economic stability, according to former Finance Secretary Margarito B. Teves.

Following the release of the Organisation for Economic Co-operation and Development (OECD) Economic Survey 2026, Teves said he is backing the international body’s call for accelerated fiscal consolidation.

The former finance chief said the government must remain committed to the medium-term Fiscal framework, which targets a deficit-to-gross domestic product (GDP) ratio of three percent and a debt-to-GDP ratio below 60 percent.

Achieving these benchmarks is critical to providing the state with the necessary fiscal space to weather future global economic shocks, Teves said.

On the expenditure side, Teves urged the administration to pivot away from “wasteful” spending. He specifically noted that untargeted cash transfers—locally known as ayuda—should be redirected toward more sustainable social safety nets, such as the Philippine Health Insurance Corp. (PhilHealth) and the 4Ps conditional cash transfer program.

“On the expenditure side, reducing wasteful spending and crafting a national budget that reflects our national development priorities should be top priorities,” he said.

To improve the quality of public investment, Teves recommended strengthening the role of the Legislative-Executive Development Advisory Council and empowering Regional Development Councils to vet local projects more rigorously before they receive funding.

He also advocated for increased transparency, suggesting that citizen participation should be institutionalized throughout the budget cycle, from the initial formulation of the National Expenditure Plan to the final oversight phase.

Turning to revenue, Teves argued that the government does not necessarily need to impose new taxes to shore up its coffers.

He pointed out a significant gap in the country’s value-added tax system (VAT): while the Philippines maintains a 12 percent VAT rate—among the highest in Southeast Asia—it only collects approximately 45 percent of its potential revenue.

While the OECD has proposed phasing out VAT exemptions for specific groups, such as senior citizens, Teves noted that such move is currently not “politically feasible.” Instead, the focus should shift toward the digitalization of tax administration to lower compliance costs and improve collection efficiency.

“Phasing out VAT exemptions for some sectors, such as senior citizens, is not politically feasible at present. Instead, priority should be given to digitalization of the tax administration process to ease compliance and boost collection efficiency,” Teves said.

Teves warned Congress against passing new laws that grant further VAT exemptions, which he said continue to erode the national tax base.

The former finance chief said that the government should prioritize stricter implementation of existing reforms, including the Ease of Paying Taxes Law and the Real Property Valuation and Assessment Reform Act.

Furthermore, he suggested that the state should favor expenditure-based incentives, such as tax deductions for research and development, over broad income tax holidays to better encourage private sector investment in labor training and high-tech machinery.