ASEAN KEY DESTINATIONS
Academics tell Aquino to abandon “no new-taxes”
“The Aquino administration’s desire to move to a higher growth path will be constrained by a weak fiscal house. Mr. Aquino has to abandon his no-new-tax policy if he wants to fulfill his promise of a robust, sustained and inclusive growth,” Diokno, a budget secretary during the Estrada administration, said at a forum hosted by Security Bank Corp.
He said the national government is not collecting enough taxes, while the debt burden is projected to rise amid normalizing interest rates.
“Fiscal deficit, which is expected to represent about 3 percent of the gross domestic product (GDP) this year, was translating into a higher debt burden for the government,” Diokno said. In a separate presentation, Felipe Medalla, also a UP economics professor, said the Philippines still has not remedied the weak tax collections. poor infrastructure, poor educational outcomes and a bad investment climate, among others.
“An improvement in tax administration would not be enough to increase revenues,” he said, adding that new tax reforms such as the excise tax on alcohol and cigarette products as well as the rationalization of fiscal incentives should be passed.
The socioeconomic planning secretary during the Estrada administration, Medalla expects 5 percent GDP growth, low interest rates and price and exchange rate stability.
“Given the BSP’s good record of maintaining price stability, this gives a reformist government a large room to maneuver,” he said, referring to the Bangko Sentral ng Pilipians.
He also noted the resilience of the domestic economy on the back of current account surpluses every year since 2003.
“This has never happened before since the balance of payments statistics became available. The current account surpluses mean that the economy has more than enough savings to finance both new public and private investments, without exerting undue pressure on interest, exchange and inflation rates,” Medalla said.
He said interest rates, which are too low, are expected to pick up in the coming months amid rising inflation.
Although the March inflation reading of 4.3 percent was lower than expected, it remained firmly in the upper half of the central bank’s target band of 3 to 5 percent for the year.
Letters that do not contain full contact information cannot be published.
Letters become the property of AseanAffairs and may be republished in any format.
They typically run 150 words or less and may be edited
submit your comment in the box below