P326-B in new revenues needed yearly to cover Covid debt

MANILA – The incoming administration will need around PHP326 billion in new revenues every year to cover both principal and interest payments due to debts incurred during the coronavirus disease (Covid-19) pandemic, a House leader said on Monday.

House ways means committee chair Joey Salceda said presumptive President Ferdinand “Bongbong” Marcos Jr. can use his “supermajority in both mandate and congressional alliances” to enact smart, efficient tax and economic policies to address the PHP12-trillion debt overhang.

He said annuitizing the debt service due to deficit spending from January 2020 to March 2022, the government will have around PHP144 billion in principal payments, and around PHP181 billion in interest payments.

“Unless we can raise that kind of revenue, we will have to downscale our public spending or borrow again to pay the debt,” he said. “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.”

He said the earlier the Marcos administration starts with a fiscal expansion program, the better it will be for investor confidence, the country’s credit ratings, debt overhang, and 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,” he said.

He suggested digital economy taxation to grow tax revenues from digital transactions.

“The digital economy has grown by at least 16 percent 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,” he said.

He also stressed the need to strengthen the tax enforcement strategy imposed during the Arroyo administration, particularly: RATE [Run After Tax Evaders], RIPS [Revenue Integrity Protection Service], and RATS [Run After the Smugglers].

There should also be stronger enforcement agreements with Coast Guard on the conventional smuggling side, and with the Department of Agriculture on the technical smuggling side, he noted.

“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.

For the Bureau of Internal Revenue (BIR), Salceda said he 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.

He particularly pointed out that the value added tax refund processes should be shortened, the tax identification number registration fully digitalized, and the electronic invoicing mandate under the Tax Reform for Acceleration and Inclusion (TRAIN) law fully implemented.

“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 said.