Right way to balance national budget with tax collections
One cannot help but knit his brows in dismay while reading these seething debates on the proposed imposition of value-added tax on tollway fees. Which calls to mind one of P-Noy’s campaign vows: “I will not pass new tax laws or increase existing tax rates if elected president.” In explaining this particular VAT, Presidential Spokesman Edwin Lacierda said that the promise was not intended to cover P-Noy’s entire term and that it all depended on the country’s financial status. Hence—as the Bureau of Internal Revenue’s total tax collections are again way below target—the VAT on road tolls.
The plain truth is that no president in this country’s history has been able to avoid imposing new tax measures in his time and emerged triumphant in balancing the national budget. Isn’t it high time, then, for our so-called financial experts to accept that new taxes are not necessarily the correct solution to our tax collection woes? On the contrary, I think that all the more would they tend to widen the gap between target and actual collections. Drawing from sheer common sense and a little arithmetic, I submit the following hypothetical illustration.
In a given year, based on existing tax laws, the tax bureau budgets P500 billion in revenues. Before that year ends and as the next year’s budget is being prepared, the bureau realizes that a collection shortfall of P100 billion is inevitable for the year. So, a new tax law is passed before the year ends, promising a tax potential of P150 billion for the succeeding year, whose new revenue budget should then be raised to P650 billion, assuming all other budget figures remain unchanged. But then, even as the tax bureau is but naturally inclined to put strong focus on the new tax law, there can never be a guarantee that the full tax potential of P150 billion can be realized. A related shortfall will surely recur. On the other hand, the special emphasis given to the new tax law would most likely weaken, rather than strengthen, the collection efforts devoted to the old taxes. That, in turn, further worsens the budget deficit for the succeeding year, and so on and so forth from year to year. As things are, it is now practically a jinx that will persist until we adopt the more correct approach. And that is, optimizing the collection of old taxes while threshing out the “nice-to-have” from the “truly necessary” expenses.
—RUDY L. CORONEL,
