Fitch Solutions’ research arm, BMI, has deemed the Philippine government’s 2027 tax collection target “ambitious,” as it relies on an estimated ₱860 billion in value-added tax (VAT) collections without introducing major tax reforms to boost revenue.
In an Aug. 13 commentary, BMI noted that the tax collection goal for the upcoming fiscal year “appears ambitious at first glance,” pointing to the assumption of a double-digit increase in VAT haul compared to the ₱762.4 billion target set for the current year.
According to BMI, the target is especially steep given the lack of significant new reforms to support such growth.
“While easing inflation and higher Metro Manila minimum wages—which will reportedly benefit over 1.1 million workers—should support consumption and VAT collections in 2027, we doubt that this alone will be sufficient to hit the target,” BMI said.
Next year’s revenue goals form part of a broader fiscal strategy embedded in the proposed record ₱7.2 trillion budget submitted to Congress by President Ferdinand Marcos Jr.
The budget proposal, up 6.6 percent from the current ₱6.793 trillion allocation, “supports continued fiscal consolidation through spending restraint and selected tax reforms.” However, BMI noted that the pace of narrowing the persistent fiscal deficit remains “modest.”
Compared to earlier projections, the 2026 total revenue target has been revised downward to ₱4.81 trillion from ₱4.98 trillion. A similar downward revision applies to 2027, with the target lowered to ₱5.21 trillion from ₱5.37 trillion.
Achieving these targets presents a significant challenge given BMI’s more conservative economic outlook compared to that of Philippine economic managers.
“Revenue targets may prove difficult to achieve even after new tax reforms, particularly as we forecast GDP growth of 4.9 percent in 2027, below the government’s 5 to 6 percent” assumption outlined in the latest budget documents.
While the government is pushing new measures—such as higher excise taxes on sweetened beverages, tobacco products, alcohol, and automobiles—BMI estimates these will yield a net revenue gain of only “₱47.9 billion annually over 2027–2030.”
Beyond revenue targets, the 2027 budget proposal reflects a major shift in national priorities toward infrastructure development. BMI observed that while social services face a 5.5 percent budget cut, “economic services receive the largest increase in the 2027 budget, largely reflecting the resumption of infrastructure spending and flood-control projects.”
This pivot toward infrastructure coincides with a steadily growing debt burden. The gross public debt-to-GDP ratio rose to 66 percent at the end of June, as sovereign debt reached ₱19.07 trillion—surpassing the government’s ₱19.06 trillion ceiling targeted for the full year.
Rising debt levels mean higher interest repayments, which BMI warned could “consume more resources that could otherwise be directed towards more productive spending.”
Beyond domestic fiscal management, external risks continue to threaten the economic outlook. BMI noted that conflict in the Middle East poses a significant risk that could “dampen revenue collections and raise the pressure for broader cost-of-living support measures, widening the deficit by more than we expect.”