IMF official presses Philippines to improve tax collection
Tax collection efforts have to be improved by the Philippines if the country is to grow at the same pace as its Southeast Asian peers, an International Monetary Fund (IMF) official yesterday said.
It was a sentiment shared by a visiting team of London-based Fitch Ratings, a Finance official said separately.
“For the Philippines to grow consistently at the levels observed in neighboring countries, it is essential that the tax effort increases substantially,” Denis J. Botman, IMF resident representative to the Philippines, said in an e-mail to BusinessWorld.
“The additional resources can be used for higher public investment and social spending. If this is combined with improving governance and lowering the cost of doing business, investment will increase, jobs will be created, and growth will accelerate.”
The Washington-based lender, according to an excerpt from its latest World Economic Outlook, has raised its 2010 growth forecast for the Philippines to 3.6%, up from its February estimate of 3.25%. The outlook, however, is still lower than the 5.4% expected this year of the ASEAN-5, of which the country forms a part.
The IMF, said Mr. Botman, expects the Philippines to trail its neighbors in terms of growth since some of the factors that allowed the country to avoid the global recession were now working against it. “Growth in the Philippines depends less on exports, which partly insulated the economy when world trade collapsed in an unprecedented manner. The flip side is now that world trade is rebounding, the Philippines experiences a smaller boost,” he said.
He also explained that the IMF raised its Philippine forecast in line with a rosier outlook for the global economy. “The Philippines is no exception and leading economic indicators suggest that growth is accelerating, led by a rebound in exports and consumption as confidence improves and remittances continue to grow,” he said.
The IMF official, however, said that, as with its world projections, the Philippine outlook remained uncertain due to the likely impact of the El Niño-generated dry spell and threats to global recovery from the fiscal worries hounding the euro zone.
The concern over chronic weak tax collections was shared by Fitch, which wonders whether the country can meet its P293-billion deficit target for the year.
Finance Assistant Secretary Teresa S. Habitan told reporters yesterday a visiting Fitch team — led by Andrew Colquhoun, director for sovereign ratings for Asia Pacific, and Ai Ling Ngiam, director for sovereign ratings for Asia — raised the need for the government to raise revenue.
She said the visiting team asked what measures will be pursued by the government to raise collections.
The government, she said, will propose to the next Congress the simplified net income taxation scheme for individuals and professionals as well as the rationalization of fiscal incentives. “Increasing the value-added tax rate to 15% from 12% and reducing the rate of corporate income tax will also be proposed,” she said.
The Fitch team — which met with officials from the Finance department, National Economic and Development Authority, the Philippine Economic Zone Authority, as well as the Internal Revenue and Customs bureaus — left yesterday at the end of a two-day visit. Its visit followed that of Standard & Poor’s early this month. BusinessWorld
