Philippine President Arroyo Calls for Support on Revenue Raising Measures

Strategic Insights -

Philippine President Arroyo has requested the support of Cebuanos, whose votes secured her a fresh six-year mandate, to endorse her administration's revenue raising measures, including the increase in value-added taxes (VAT) from 10 to 12 per cent. During a press conference in Lapu-Lapu City, the President emphasized the need to raise revenues to fund critical projects and alleviate borrowing. The administration requires P80 billion (US$1.5 billion) to fund development projects, some of which will be implemented in Cebu. The President warned that without new revenues, the Philippines "will be a poor country forever." The proposal to increase the VAT is facing opposition from the Senate and is being challenged by Cebu's mayors.

Key Takeaways:

  • President Arroyo requested the support of Cebuanos to endorse her administration's revenue raising measures, including the VAT increase from 10 to 12 per cent.
  • The administration requires P80 billion (US$1.5 billion) to fund development projects, some of which will be implemented in Cebu.
  • Without new revenues, the Philippines "will be a poor country forever," said President Arroyo.
  • The proposal to increase the VAT is facing opposition from the Senate and Cebu's mayors.
  • The League of Municipalities of the Philippines (LMP) in Cebu suggested that the government should consider increasing tax collection efficiency, removing or reducing exemptions, and imposing an across-the-board import surcharge.
  • Citing data from 1998 to 2003, the LMP noted that tax leaks caused the government to lose P144 billion in 2003 alone.
  • The LMP also pointed out that while the government expects to earn P34 billion more with the increase in VAT, increasing tax collection efficiency and removing exemptions would more than suffice to address the fiscal requirements of the government.

Statistics:

  • P80 billion (US$1.5 billion) is required to fund development projects.
  • P144 billion was lost due to tax collection inefficiency in 2003.
  • P34 billion is expected to be earned with the increase in VAT.
  • P353 billion was lost due to tax collection inefficiency.
  • P195.5 billion in VAT exemptions and privileges were allowed by Congress in 2003 for export firms and those under investment priority areas.

Sources:

  • Philippine News Agency (PNA)
  • Asia Pulse