Unless Congress acts soon enough, the government will find it difficult to finance the multitrillion-peso 2018 national budget, according to the National Economic and Development Authority (Neda).

Socioeconomic Planning Secretary Ernesto M. Pernia recently told reporters the proposed tax-reform measures must include compensatory measures, making it feasible to finance the national budget.

The tax-reform measures  include not only reductions in the personal income tax, but also the removal of value-added tax (VAT) exemptions, including those for seniors.

“They [tax-reform measures] should be approved. There is a need to balance between reduction of revenue and compensation for the reduction,” Pernia said.
“[Otherwise] it will make the 2018 budget difficult.”

The proposed tax reforms involve foregone revenues of around P200 billion but, at the same time, will generate more or less P566 billion as prospective incremental collection.

This was the reason the proposed tax measures formed part of the agenda of the Cabinet-level Legislative-Executive Development Advisory Council (Ledac) next year.

Pernia said Ledac plans to discuss the easing of restrictions on private investments and bank-secrecy laws, as well as the tax-reform measures.

The Ledac provides policy advice to the President and integrates the Legislative agenda of the administration with the national development plan, among other functions. The Neda is the principal secretariat of the Ledac.

“We are going to look at priority bills. There’s a long list of priority bills. There’s a lot,” Pernia said.

One of the major items included in the Duterte budget was increased funding for infrastructure projects. The national government plans to increase infrastructure funding to 5 percent or more of local output or the GDP annually.

Budget Secretary Benjamin E. Diokno earlier said the government plans to spend a total of P8.2 trillion up to P9 trillion between 2017 and 2022.  This means the government needs to spend around P1.33 trillion a year to usher in what it calls the “golden age of infrastructure” for the country.

The financing cost does not include public-private partnership (PPP) projects that will continue to be pursued under Duterte.

Diokno said the Duterte administration will make changes to the PPP Program by accepting unsolicited project proposals and undertaking hybrid PPP projects, where the government builds  the infrastructure and the private sector operates and maintains them.

The budget secretary remains confident that, despite the few number of projects in the government’s pipeline, they are confident they will fill in the so-called infrastructure gap and undertake more projects in the coming years.

“President Duterte has made clear that his administration will keep a deliberate focus on developing the regions through connective infrastructure. That is why we are ramping up public infrastructure spending next year, allotting at least 5 percent of GDP to go to infrastructure projects, until 2022,” Pernia said.

For 2017, the national government intends to spend P3.35 trillion. The budget has been ratified by the House of Representatives and Senate of the Philippines.

Of the P3.35 trillion, 40.14 percent, or P1.34 trillion, will be for empowering human resources through education, health care, social welfare and other social services.

About P923 billion, or 27.6 percent, will go to economic services to fix broken infrastructure networks, boost agriculture and rural sector, as well as generate more jobs and livelihood.

For general public services and defense, the government will allocate 22 percent, or P729 billion, of its total budget.

21 December 2016
By Cai Ordinario