NEW TAX MEASURES. New tax reform measures are needed to help lift government tax collections, according to Rizal Commercial Banking Corporation chief economist Michael Ricafort on Monday (April 3, 2023). He said the new measures are expected to bring down the country's debt-to-gross domestic product level to below the 60 percent international standards. (PNA file photo)

MANILA – An economist has cited the immediate need for additional tax reform measures to boost government revenues, which contracted in February.

Data released by the Bureau of the Treasury on Monday showed that government revenues went down by 0.25 percent in the second month this year to PHP211.9 billion party due to the 5.29 percent year-on-year drop to PHP192.3 billion in the Bureau of Internal Revenue collections.

Revenues of the Bureau of Customs rose by 5.83 percent to PHP62.9 billion, which boosted state tax collections for the month, Rizal Commercial Banking Corporation chief economist Michael Ricafort said.

On the other hand, government spending was little changed after rising by 0.01 percent to PHP318.2 billion in February.

This resulted in a budget gap of PHP106.4 billion in the second month this year, 0.54 percent higher than PHP105.8 billion last year.

In the first two months this year, government revenues inched up by 14.18 percent annually to PHP490.5 billion, higher than the 0.16-percent rise in expenditures to PHP620.7 billion.

Budget deficit as of end-February this year contracted by 53.07 percent to PHP60.6 billion.

“Higher prices/inflation and higher interest rates/borrowing cost may have adversely affected tax revenue collections of the government and could have also increased the government’s overall expenditures, thereby leading to wider budget deficits that could fundamentally add to the government’s overall debt,” Ricafort said.

He thus highlighted the need to introduce and implement more tax reform programs “to further boost/intensify tax revenue collections through new/higher taxes.”

Ricafort said intensified tax collections from existing tax laws and a more disciplined fiscal spending will “help further improve the country’s fiscal performance and help achieve more sustainable debt management for the coming years/generations.”

He said new tax measures are also expected to bring down the government’s debt-to-gross domestic product ratio below the 60-percent international standards “to help sustain the country’s favorable credit ratings of 1-3 notches above the minimum investment grade.”

“For the coming months, there is still a chance for narrower budget deficit or even a budget surplus during the tax collection season towards April 2023 amid further reopening of the economy towards greater normalcy with no more restrictions recently and as a policy priority going forward, thereby leading to increased sales, profits/incomes, employment, livelihood, and other business/economic activities that fundamentally increase the government’s tax collections,” he added. (PNA)