Marcos’ planned new taxes may have limited impact


By Diego Gabriel C. Robles and
Alyssa Nicole O. Tan, Reporter

THE ECONOMIC TEAM’S plan to pursue new taxes on digital services and pollutants, as well as “rightsizing” of the bureaucracy, may not generate enough revenues needed to repay the Philippines’ ballooning debt, experts said.

Finance Secretary Benjamin E. Diokno last week said they are considering the imposition of taxes on digital or online transactions, single-use plastics, and carbon emissions. This as the Marcos administration looks for new sources of revenues to lower the fiscal deficit and repay the P3.2-trillion additional debt incurred during the coronavirus disease 2019 (COVID-19) pandemic.

“New taxes on digital transactions, single-use plastics, carbon and online services will likely help deliver fresh revenue streams to government coffers. Estimates have been floated on projected collections although it may be difficult to say whether this will be enough to completely offset the current debt and deficit levels,” said ING Bank N.V. Manila Branch Senior Economist Nicholas Antonio T. Mapa.

Bernardo M. Villegas, economist at the University of Asia and the Pacific, said these additional taxes “will not be enough but they will contribute to reducing the fiscal deficit.”

“We need all the tax increases we can get,” Mr. Villegas said.

The Bureau of the Treasury (BTr) earlier estimated the government needs to raise P249 billion annually in incremental revenues to avoid new borrowings and repay debt.

“Given the amount of plastics, carbon and online services that are being used, this can bring in a sizable amount. This may not be enough to pay for the debt, but its consequences in terms of the environment and the inequality are probably more important than reducing the debt,” said Leonardo Lanzona, director of the Ateneo Center for Economic Research and Development.

John Paolo R. Rivera, economist from the Asian Institute of Management, said a tax on single-use plastics and carbon emissions will have “good environmental implications because it will inhibit its use, which is good for the environment in the long run.”

Finance Secretary Benjamin E. Diokno last week broached the possibility of taxes on single-use plastics and on carbon emissions, which would also aid the country’s efforts against climate change and pollution.

Under the previous administration’s fiscal consolidation plan, a P20 excise tax per kilogram of single-use plastics would generate P1 billion in revenues annually.

A 12% value-added tax on online advertisement services and other digital and online services would also generate P13.2 billion in annual revenues.

Several senators backed the proposed tax on single-use plastics and online transactions.

“Goods and services bought through the internet should really be taxable for VAT (value-added tax) as all goods and services are, unless expressly made exempt by law,” Senator Juan Edgardo M. Angara said in a Monday statement.

Other countries already impose a tax on single-use plastics, which is intended to encourage the use of recyclable bags, Mr. Angara added.

In a Viber message, Senator Mary Grace Natividad S. Poe-Llamanzares said taxing single-use plastics would hopefully discourage people from using these, and lessen their impact on the environment.

Also, Senator Ramon B. Revilla, Jr. said Congress should review and update its existing tax laws on the digital economy.

“It is also unfair because local online businesses are covered by taxation laws, but multinational corporations who have less physical presence but a wider reach do not seem to be within the scope. They may have to be properly taxed given the outdated provisions and leakages in tax measures,” Mr. Revilla said in a statement.

The House of Representatives approved in September 2021 a bill seeking to impose a 12% VAT on digital sale of services such as online advertisements, subscription services, etc. However, the Senate did not approve the counterpart measure.

Meanwhile, Senator Francis Joseph G. Escudero said that it may not be the best time to implement the two proposed measures.

“It’s always easier to go for imposing new, or increasing whatever existing, taxes in order to raise revenues for (the) government,” he said in a Monday statement. “However, this is burdensome and is not in keeping with the times of slow economic growth, increased unemployment and rising inflation.”

Mr. Escudero suggested that Mr. Diokno focus on plugging tax loopholes and improving revenue collection by the Bureau of Internal Revenue and Bureau of Customs.

“With nearly P200 billion in uncollected taxes lost to either corruption and/or inefficiency, this is by far more than any projected revenue of the new taxes he is mulling,” he said.

Economic managers are also pushing for the passage of a government rightsizing law that would eliminate redundancies and duplication in government operations. 

Budget Secretary Amenah F. Pangandaman last Friday said they will endorse the rightsizing bill as one of the legislative priorities.

“It’s fairly unpopular, I think, but with the instructions of the President to the Cabinet members to also look at your existing structures, it’s wise to refile the bill,” she said.

For Security Bank Corp. Chief Economist Robert Dan J. Roces, rightsizing the bureaucracy is fine, “as long as this supports the objective of fiscal consolidation without crimping government functions and the private sector’s recovery.”

Mr. Lanzona noted that reducing the bureaucracy will result in greater savings for the government.

“[But] the amount saved may not be enough relative to the huge debt but its externalities are very important not only for economic but also institutional efficiency,” he added.

Mr. Rivera said the impact of this measure may not be huge, but “some impact is better than no impact.”