Press Releases

Salceda on fiscal program of next admin: Around P326b in new revenues needed annually to cover COVID debt

May 16th, 2022

House Ways and Means Chair Joey Sarte Salceda (Albay, 2nd district) says that the incoming administration will need around P326 billion in new revenues every year to cover both principal and interest payments due to debts incurred during the COVID-19 pandemic. The House tax panel chair says that “unless we can raise that kind of revenue, we will have to downscale our public spending or borrow again to pay the debt.”

“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 says.

Salceda adds that “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.”

Salceda says that presumptive President-elect Ferdinand “Bongbong” Marcos Jr. can use his “supermajority in both mandate and Congressional alliances 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.”

‘Quick and effective’ fiscal measures needed

Salceda also says that “the earlier the Marcos administration starts with a fiscal expansion program, the better it will be for investor confidence, our credit ratings, our debt overhang, and our future growth prospects.”

“You need money for the most important campaign promises: cheaper rice, more efficient government services, and improved agriculture.”

“So, I would suggest quick and effective fiscal measures being undertaken in the first hundred days.”

“You need digital economy taxation to grow tax revenues from digital transactions. The digital economy has grown by at least 16% during the pandemic, while tax revenues from digital sources have remained practically unchanged, based on BIR numbers. We can do that on both the policy side and the tax administration side.”

“You also need to strengthen the hallmarks of PGMA’s tax enforcement strategy – RATE [Run After Tax Evaders], RIPS [Revenue Integrity Protection Service], and RATS [Run After the Smugglers]. We especially need stronger enforcement agreements with Coast Guard on the conventional smuggling side, and with the Department of Agriculture on the technical smuggling side.” 

“The Bureau of Customs gets a bad rap during campaigns, but they have been highly improving under Commissioner Rey Guerrero, due to digitalization reforms, enforcement missions, and a general commitment to making customs compliance easier. So, I would either him keep where he is, or I would strengthen and institutionalize the improvements he has made in customs,” Salceda said.

“In BIR, I would ask the new President to establish three new internal reforms: The creation of a digital taxation service, the creation of a transfer pricing service, and ease of paying taxes reforms in the BIR processes. I would particularly want to see VAT refund processes shortened, TIN registration fully digitalized, and the electronic invoicing mandate under the TRAIN law fully implemented,” Salceda suggested.

“We have to enact new packages of tax policy reforms of course, but the measures I mentioned are the easiest to do, and the President can take steps towards them by sheer executive action,” Salceda added.

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