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Credit rating hinges on passage of one tax bill


CONGRESS should pass at least one tax measure by November, and two measures by the end of the year, to avoid another sovereign rating downgrade from credit rating firm Moody’s Investors Service, the Philippines’ chief investor relations official said Wednesday.

“The Philippines is far from an upgrade. What is important is we should be able to pass any of the tax measures by the time Moody’s arrive in November. We have to carry it out immediately,” Cora Guidote, executive director of the Investment Relation Office (IRO), said.

Moody’s review team is expected to arrive in the last week of November to assess the country’s economic fundamentals; Fitch Ratings’ review team is scheduled to arrive next week.


She added that the ratings agencies expect two priority tax measures to be passed before the end of the year, particularly revenue-positive measures, which include the sin-tax indexation and incentive rationalization bills.

Moody’s in January this year downgraded the outlook on the country’s sovereign rating to negative from stable.

Fitch Ratings, meanwhile, downgraded the country’s sovereign rating to BB stable, also at non-investment grade in June 2003.

The sovereign rating becomes a country’s rating benchmark by default for all corporate issuers and supersedes corporate ratings. Hence, no corporate rating is considered equal or above the sovereign rating.

Guidote said the credit rating firms will focus on assessing the cash flows expected to be generated from the implementation of the tax measures. The government hopes to generate P80 billion from the priority tax measures and P20 billion from administrative measures.

She added that timing is critical in the passage of the tax measures, revenues from which will be used by the national government to pay for National Power Corp.’s (Napocor) interest payments amounting to P34 billion starting January this year. 


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