To tax or not to tax
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Noynoy is in a quandary. The budget would be in a perpetually huge deficit if his administration does not take action in matching government expenditures with what is being earned through primarily taxes.
The other side of the equation is that the government needs to spend more as the nation’s need for basic services grows and along with it, higher allocations for the payments of interests and principals on debts when the shortfall in the budget hit record levels since the administration of former President Gloria Arroyo.
Revenues of the Bureau of Internal Revenue and the Bureau of Customs are making modest gains in meeting targets but the efforts will not likely be enough if the deficit in the budget would be drastically reduced from its current astronomical levels of above P300 billion every year which is equated with more borrowings by the government.
And the clincher is that Noynoy had promised during the campaign period that he will not impose new taxes or increase these during his administration.
Lately, the Palace has been issuing confused statements about the campaign pledge of Noynoy which was most remembered by his “read my lips-no new taxes” brag.
One of his spokesmen, Edwin Lacierda, rationalized that the pledge was only for the first year of Noynoy’s administration and that the fiscal situation will dictate the policy for next year. What a lie that is. Noynoy during his campaign days, never said his no new taxes pledge was merely for a year.
What was being broached by the Palace mouthpieces today is that the tax increases would start with the so-called sin products and to be followed by other tax measures.
The raising of the tax on so-called sin products is a precursor of more painful tax hikes as it seems to be regularly used to test the waters on the tolerance of the public for a new round of flagellation through new or increased taxes.
Sin products are cigarettes and liquors that are not necessities for daily survival, relatively for most individuals and an increase in the tax on these are not likely to upset the public, unlike imposing other taxes.
The sin tax is also considered to be a way to force individuals to improve their health.
In the past, an increase in the sin tax was followed by the raising of the value added tax (VAT) or the sales tax that covered almost all products under the sun.
Incidentally, there is already a proposal to increase the 12 percent VAT to 15 percent as a way to manage the huge budget deficit.
Later, another spokesman, Sonny Coloma, went on air saying that Noynoy’s priority remains focused on improving the efficiency of tax collections and not on imposing new taxes.
He was strangely silent, however, about possible tax increases.
Noynoy appears to be getting by on the budget thus far as a result of the series of increases in fuel prices but the windfall from high prices is not expected to last long since keeping prices too high would light the fuse of discontent.
In the first three months, the budget deficit was limited to P26 billion as a result of higher tax collections mainly on fuel products and major spending cuts.
Various multilateral institutions have warned about limiting public spending since it is expected to result in a slowdown in the economy.
Also, the massive underspending went against an earlier Palace statement that limiting the budget deficit is not the priority of Noynoy but assuring that of public finances being well spent.
The key question posed to the Aquino administration is its ability to manage the budget and balance the need to spend and assuring that the needs of Filipinos, primarily the poor, are met.
The current effort to cut corners is making the budget picture more favorable at the expense of crucial services where biggest corners seem to have been lopped off.
Amid the sliding survey ratings on Noynoy, it seems that the goal now is to push down the fiscal shortfall by whatever means.
There goes Noy’s straight path in exchange for the fiscal short cut.
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