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Philippines: Deficit cap stays even if revenues disappoint
The government will stick to its target of a wider budget deficit even if Congress decides to pass a watered-down version of tax reforms deemed crucial for a massive infrastructure program.
“Hopefully the Congress bicameral conference [committee]will pass a Train (Tax Reform for Acceleration and Inclusion) version that will yield revenues that will allow the country to achieve what it really wants,” Finance Secretary Carlos Dominguez 3rd said on Tuesday.
The House of Representatives has already passed its own version of the proposed Train Act, which is expected to generate revenues of P119.4 billion during the first year of implementation.
The Senate, which is still deliberating its own measure, has been criticized by the Finance department for pushing a bill that will generate just P59.9 billion.
Economic managers are also hoping that the final measure will be passed before the year ends for immediate implementation, but the legislative window has narrowed since Congress – currently on a one-month break — only has about a month left before adjourning for the holidays.
Any measure approved by the Senate, which missed a goal to pass its Train version earlier this month, will still have to be reconciled by a bicameral committee composed of representatives from both chambers.
The Train bill, comprising the first phase of the administration’s proposed tax reform program, has been touted as enabling the government to invest massively in infrastructure without compromising the country’s fiscal position.
It will also in part support massive investments in education, training, health care and other social services, the Finance department has said.
Asked what options the government had if the final Train version turned out to be lacking in revenue terms, Dominguez replied that “there is plan B.”
“The plan B is to stick to [the budget deficit goal of]3 percent deficit to GDP (gross domestic product), that is a hard number. We cannot afford to go beyond that,” he said.
The Duterte government raised the programmed deficit to GDP ceiling to 3 percent from 2 percent as it pledged to implement massive infrastructure projects under the “Build Build Build” program.
The Budget department has said that the higher deficit cap and tax reforms would give the government an additional fiscal space of about P500 billion per year.
The administration has identified 75 priority projects, of which 53 will cost almost P1.6 trillion. Twenty-two of the 75 have already been approved by the National Economic and Development Authority Board.
Spending on these projects is expected to hit P9 trillion over the Duterte administration’s six-year term.
Source: http://www.manilatimes.net/deficit-cap-stays-even-revenues-disappoint/358525/