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By Maricel E. Burgonio, Reporter
THE International Monetary Fund (IMF) has called
on the Philippines to raise tax rates to fund the government’s
medium-term infrastructure plan, sustain the country’s economic
growth, and stem the departure of skilled Filipinos.
In a briefing, Reza Baquir, the IMF resident
representative, said the Philippine economy, as measured by its
gross domestic product (GDP), is likely to grow 6.3 percent this
year under the envisioned fiscal reforms. This is higher than the
lender’s original forecast of six percent, and in line with the
government’s estimate of 6.3 percent to seven percent.
The IMF official said net exports would
contribute less to growth while remittance income from overseas
workers could remain strong.
However, the global credit crunch could
undermine recent gains through a disorderly unwinding of currency
flows, including a possible drop in workers’ remittances, he said.
“Improved fundamentals, prudent macroeconomic
policies and a strong reserve position should help the economy
weather shocks,” he added.
Under the reform scenario, the IMF official said
the growth forecast will be supported by an increase of tax revenues
as a percentage of GDP to 14.8 percent.
He said the government should improve its
revenue effort to meet priority targets such as infrastructure
development as current reforms would only allow the economy to grow
modestly.
“Under the staff’s reform scenario, tax
policies should be introduced to strengthen the tax base, allowing
higher capital and social spending. The expectation of better
infrastructure in the medium term would catalyze private investment,
leading to a rebound in domestic employment and reduction in
emigration,” Baquir said.
He said the government should strengthen the tax
base by cutting down on tax incentives and raising as well as
indexing the excise tax to inflation to partly recoup revenue lost
over the last decade amounting to 1.5 percent of GDP.
The government should likewise accelerate tax
administration reform particularly at the Bureaus of Internal
Revenue and of Customs, specifically strengthening management
controls, improving the integrity of the import and export clearance
system, and upgrading enforcement and intelligence functions.
As more money is needed to fund priority
projects while maintaining fiscal discipline, the IMF estimates that
revenue should rise by about 1.5 percent of GDP from 16.25 percent
to 17.75 percent of GDP over the medium term, to meet the capital
spending goals of about 4.5 percent of GDP while balancing the
budget.
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