DoF says Aquino should reconsider tax cut plan

abs-cbnNEWS.com

Posted at 06/01/2010 5:41 PM | Updated as of 06/01/2010 5:41 PM

MANILA, Philippines - President-apparent Benigno Aquino III needs to rethink his plan to cut taxes, the Department of Finance (DoF) said on Tuesday.
Implementing a tax cut will adversely affect the government's budget for social and pro-poor services such as health, education and infrastructure, said Finance Undersecretary Gil Beltran.
Aquino pledged during his campaign to cut taxes and government improve collection to narrow the budget deficit.
"They may reduce taxes but they have to cut spending for the poor, and they have to remove these losing government-owned and-control corporations," said Beltran.
Beltran said previously that several state firms stand to lose their subsidies if the government fails to raise additional revenue through new tax measures.
He added the incoming administration can adopt "expenditure reform" if Congress fails to pass revenue measures.
Beltran explained that if the next government plans to maintain the level of spending without new tax measures, the state has no recourse but to tap more borrowings to finance expenditures.
In lieu of new taxes, Aquino vowed to go after tax evaders and smugglers to boost revenue and rein in a budget gap that widened to a record P298.5 billion last year, equivalent to 3.9% of gross domestic product.
"By utilizing the taxes already there, collecting them more efficiently, we will be able to manage the fiscal situation properly and responsibly," Aquino said.
The government this year is forecasting a deficit of P293.2 billion, equivalent to 3.6% of GDP.
Earlier, Finance Secretary Margarito B. Teves urged the next administration to hike the
value-added tax (VAT) from 12% to 15% to narrow the budget deficit.
Initial estimates from the DoF showed the increase in VAT will yield about P73.92 billion yearly if VAT rate is raised gradually from 12% to 15% in the next five years.
DoF said the increased revenue will be realized even if the corporate income tax of 30% is reduced to 25% by 2013.