Tax collection reforms paved the way for the positive outlook of a Japan-based rating agency for the Philippines, according to the Department of Finance (DOF).
In a statement over the weekend, Finance Secretary Cesar Purisima commended Ratings and Investment Information Inc. (R&I Ratings) in changing its rating outlook for the country from stable to positive, while affirming its investment grade rating of “BBB-.”
“The gains of good governance are again recognized by those who monitor world economies, with our tax collection reforms and our landmark sin tax reform law contributing greatly to the positive outlook,” he said.
In its report, R&I cited the efforts of the government to improve fiscal consolidation, by laying out a plan to contain the fiscal deficit to 2 percent of the gross domestic product (GDP) by beefing up its tax collection capacity.
“The fiscal deficit for 2012 was 2.3 percent relative to GDP, a slight increase from 2 percent in 2011, due partly to public investment, whose execution pace returned to a normal level. The 2013 budget targets 2 percent in line with the mid-term plan,” it stated.
However, the ratings agency said that despite the significant increase in public investment in the country, research by the World Bank and other institutions suggests that the level remains insufficient.
It identified the fiscal position of the Philippines as a major constraint, adding that in 2012, tax revenues are only 12 percent to 13 percent of GDP.
“R&I positively views the government’s leadership in raising the sin tax levied on tobacco and alcohol beverages. Still, reform on the tax code and system aimed at a stronger tax collection capacity and better spending efficiency remains an important issue to be addressed,” it stated.
Earlier, the Bureau of Internal Revenue said that it eyes to raise its tax collection P1.6 trillion by 2015. For this year, the bureau is targeting a tax collection of P1.253 trillion, 17.59 percent higher than the previous year’s P1.058 trillion.
On the other hand, R&I also said that the political situation in the country had been consolidated after the inauguration of the government led by President Benigno Aquino 3rd in June 2010.
“The political situation in the Philippines has undoubtedly consolidated under the Aquino government. It is not an overnight task, however, to address the issues ranging from lack of infrastructure to the perception of widespread corruption in order to improve the investment climate,” it stated.
It also mentioned that the government significantly restored the peace of western Mindanao, a part of the island which used to ruin the country’s image.
“I commend R&I for noting not just the prudent fiscal management we have implemented under President Aquino, but the great strides we have taken toward lasting peace in Mindanao. With the recent signing of the wealth sharing annex to the Framework Agreement on the Bangsamoro, we have come closer to enshrining perpetual inclusive growth in law for all Filipinos,” Purisima added.