As expenditures for COVID-19 response add up while revenue collections slow down amid the pandemic, Finance Secretary Carlos Dominguez III on Wednesday said that this year’s budget deficit could balloon to “around P1 trillion.”
Dominguez told a press briefing that the additional funding to address the socioeconomic fallout due to COVID-19 would be sourced from loans being extended by the Asian Development Bank, the China-led Asian Infrastructure Investment Bank and the World Bank—multilateral lenders whose discussions with the Philippine government were “making very good progress.”
Under the Duterte administration’s four-pillar socioeconomic strategy against the new coronavirus, the government plans to borrow an additional P310 billion from foreign lenders to augment its funds, on top of the record high P1.4-trilion borrowing program under the 2020 national budget.
Dominguez disclosed that the Philippines was also in “very early stages” of talks for project-based financing from bilateral development partners such as China, France, Japan and South Korea.
The Cabinet-level Development Budget Coordination Committee last month projected this year’s expenditures on public goods and services to climb to P4.16 trillion from P3.8 trillion last year, resulting in a wider budget deficit of P990.1 billion, equivalent to 5.3 percent of gross domestic product (GDP).Meanwhile, the government expects to collect P3.17 trillion in tax and nontax revenues in 2020, barely up from P3.14 trillion last year.
Dominguez noted that the extension of tax-filing and payment deadlines in consideration of the movement restrictions during enhanced community quarantine (ECQ) had postponed the collection of taxes on income earned last year.“So we should still have a hefty collection, only postponed,” Dominguez said.
However, Dominguez said that collections of sin taxes slapped on alcohol and tobacco were “very bad” while the take from levy on sugar-sweetened beverages was “weak” amid the ECQ imposed in Luzon and other parts of the country since mid-March.
Since sin taxes were to finance a portion of the universal health care program, Dominguez said that the government would review the funding projections of the state-run Philippine Health Insurance Corp. (PhilHealth).
“We will have some proposals on that because the expenditures of PhilHealth are also going up because of this COVID-19 virus. We have to measure both sides—the additional expenditures and growing revenue,” Dominguez said.
As a form of relief to businesses postpandemic, the government may also slash corporate income tax rates “more quickly than originally planned” under the proposed Corporate Income Tax and Incentives Reform Act (Citira), Dominguez disclosed.
Citira is aimed at rationalizing the tax perks being enjoyed by investors, while gradually reducing the income tax rate slapped on businesses to 20 percent over a 10-year period from 30 percent at present—the highest in the Association of Southeast Asian Nations.
Given smaller revenue collections and projections to date, Dominguez said that the executive could not seek from Congress a supplemental budget for 2020.
“We have been very careful about asking for supplemental budget because, actually, we don’t have supplemental revenue. So we will strive to live within the P4.1-trillion budget this year, and so far we’ve been okay with that,” Dominguez said.Asked for his expectations on first-quarter gross domestic product performance, Dominguez said that GDP could still post positive growth at the start of the year.
The government will report on the first-quarter GDP figures today, May 7.
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