Philippine revenue performance and the US economy
July 16, 2024 | 12:01 am
My Cup Of Liberty
By Bienvenido S. Oplas, Jr.
Philippine government revenues continue to improve even with no new taxes. The high economic growth just helps expand the revenue base. More business activities equal more revenues.
REVENUE PERFORMANCE 2019-2024
There is one revenue source that is lagging — excise tax. Looking at the period of January-May of each year, the highest excise tax collected was in 2019 with P144 billion, then this declined during the COVID-19 lockdown, then recovered to P125 billion in 2022, then declined again to only P113 billion in 2024 (see Table 1).
Among the “public bad” products slapped with an excise tax, only tobacco experiences a consistent decline in revenues. As the tax rate increases, the tax revenue decreases. For instance, a tax of P50/pack in 2021 yielded P176 billion; P55/pack in 2022 yielded P160 billion; P60/pack in 2023 yielded P135 billion. I made my own projection and believe that this year a tax of P63/pack would yield around P111 billion (see Table 2).
The idea that a “higher tobacco tax rate to reduce smoking while getting higher revenues” is not happening. A reduction in smoking is true only for legal tobacco, but when one looks at smuggled and illegal tobacco, there is more smoking happening as their retail prices are low — about P45-P50/pack vs legal tobacco which sells for at least P110/pack as the tax alone is already P63.
Congress should do something about this to arrest the further deterioration in excise tax collections. Every P1 billion in unrealized tobacco tax means P1 billion that goes to smugglers, criminal syndicates, and their corrupt protectors in government.
At the Economic Journalists Association of the Philippines (EJAP) event on July 8, Secretary Ralph G. Recto of the Department of Finance (DoF) said in his keynote message that “While no new tax proposals are on the table, refined revenue reforms await congressional approval that will add an average of P42 billion annually in additional revenues. We are strategically maximizing our non-tax revenues to increase collections and ensure sustainable funding — P100 billion dividends from GOCCs (government-owned and -controlled corporations), P42 billion from privatization of government assets. Along with preventing wasteful expenditures, these strategies will help keep the deficit in check and reduce sustainably.”
On preventing or reducing wasteful public spending, Budget Secretary Amenah F. Pangandaman engaged with the Philippine League of Local Budget Officers (Phillbo) and Public Financial Management (PFM) practitioners last week and encouraged the LGUs to practice sound and efficient management of resources, especially their shares in the National Tax Allotment, and promote timely and effective implementation of local programs and projects.
Keep on this track, Mr. Recto and Ms. Pangandaman. Reducing the public debt stock via revenue improvement while reducing wasteful spending will redound to the public in the form of lower interest payment and no new taxes.
US ECONOMY UNDER TRUMP AND BIDEN
Last Saturday, an assassination attempt was made on former US President Donald Trump. With only four months to the Presidential elections in November, the economy under current US President Joe Biden remains at the top of agenda of most US voters. With limited space I will discuss and compare only inflation management of the two administrations.
From 2017-2020 under Trump, the US inflation rate ranged from only 1.2% to 2.4%. Under Biden, it went up to 8% in 2022. Among the industrial North America and European nations, the US under Biden was the inflation-instigator in 2021 with 4.7%, followed by Canada and Germany.
In East Asia, the Philippines had the highest inflation rate in 2021 and 2023 while Singapore and Thailand led in high inflation in 2022 (see Table 3).
Biden and the Democrats called the high inflation of 2022 “Putinflation,” or inflation instigated by Russia’s invasion of Ukraine. But this is not true. In January 2021, the last month of Trump’s administration, US inflation was only 1.4%. In January 2022, after 12 months of Biden and one month before the Russian invasion, US inflation was already at 7.5%.
In the four years of Trump, there was no new war, nothing from 2017-2020, while he also attempted to pull US troops out from Syria, Iraq, and Afghanistan. The US and the world should go back to that situation. No war or fewer wars, more trade and commerce, more peace and diplomacy in the world.
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