Press Release
August 18, 2017

Villanueva to economic managers: Don't tie our hands on tax reform with 2018 budget

Senator Joel Villanueva has cautioned the administration's economic managers on 'having the senators' hands tied' with the proposed budget parameters during their hearing on Wednesday with the Development Budget Coordinating Committee (DBCC).

Based on the projection presented by the economic managers, the government will be collecting an additional revenue of around P413 billion for 2018, which is also the expected increase in tax collection for the same year.

"This suggests that 99.9% of the projected increase in our revenues for next year will be sourced from the additional taxes we expect to collect," Villanueva said.

The P413 billion increase in 2018 represents an 18.3% growth in taxes from the programmed tax collection of P2.2583 trillion this year. This 18.3% growth in collection would mark a historical increase since 2006 when taxes rose by 20% following the reform measures legislated in 2005.

"The P413 billion increase could mark the biggest jump in tax collection, in nominal terms, in our country's history," the senator added.

Meanwhile, the 2018 projected disbursement is at P3.36 trillion which translates to an increase of P455 billion from this year's programmed disbursement at P2.9 trillion.

"So, you have P413 billion increase in revenue sourced from additional taxes and P455 billion increase in spending for 2018. Does this mean that almost 90% of the additional funds we expect to spend next year will be funded from the additional taxes we expect to collect?" Villanueva asked.

Provided with the said estimates, Villanueva inferred that the bulk of the P413 billion additional taxes the government expects to collect next year will depend on the shape of the tax reform package the Congress will pass this year.

On the revenue side, the Department of Finance estimates that at least P133.8 billion additional money will be collected from the proposed TRAIN. At most, the DOF expects to collect an additional P169.1 from the proposal filed by Senate President Koko Pimentel.

"At the most 'optimistic' outcome of the TRAIN, which is currently in the shape of the version of SP Pimentel, you would still be P240 billion short of the targeted P413 billion additional revenue. How does the DOF plan to generate this additional money?"

In response to the question posed by Villanueva, Budget Secretary Benjamin Diokno said that the "balance will be collected from tax administration reforms and the buoyancy effect from higher GDP growth if GDP will grow by 7 percent."

To which, the senator reiterated that he just wanted to make sure that the Executive department "is not trying to get ahead of Congress" in such a way that the Congress will be pressured to pass TRAIN in toto since the budget depends on it.

"As an example, I personally want the tax on sugar-sweetened beverages earmarked for food programs to address our undernutrition and hunger problems. That will have an effect on how the proceeds of the new taxes will be allocated. Preempting the new tax policy takes away the freedom of Congress to design a tax regime that we think will best benefit the public," Villanueva stressed.

"If the implementation and attainment of targets for Build Build Build projects principally hinge on financing or funding support from the revenues to be derived from the executive's version of the TRAIN, then we might have a scenario where the agency programs lack funding next year. Congress then gets blamed for bigger deficits because we did not follow the Executive," Villanueva said.

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