Economists urge gov't to focus on tax collection, not new levies

As discussions around potential new tax measures reemerge, economists from the private sector are urging the Philippine government to focus on improving the implementation and enforcement of existing tax laws rather than introducing new levies.

Patrick Ella, economist at Sun Life Investment Management and Trust Corp. (SLIMTC), emphasized the need for greater efficiency in tax collection. “I can’t emphasize more the need for the government to simply improve tax collection,” he said, arguing this approach boosts revenue without adding burden to the economy.

He noted that the country’s tax-to-GDP ratio remains below the World Bank’s recommended 15% threshold, which is considered essential for sustainable development. Historical data shows that the Philippines nearly reached this level in the late 1990s before declining after the Asian Financial Crisis.

Rizal Commercial Banking Corp. (RCBC) chief economist Michael Ricafort echoed the sentiment, saying that enforcement of existing laws—including action against tax evasion—should be prioritized to sustainably grow recurring revenue.

While the Marcos administration previously committed to a "no new taxes" policy, recent discussions—particularly surrounding a possible online gaming tax—have stirred debate over the government’s fiscal direction.

UnionBank chief economist Ruben Carlo Asuncion acknowledged the administration may soon face a tough balancing act. While maintaining policy consistency could help investor confidence, holding off on needed revenue measures might pose long-term risks to fiscal sustainability and infrastructure development.

Economists also highlighted the potential downsides of poorly timed or regressive taxes, particularly as households continue recovering from the pandemic and long periods of inflation. “Abrupt or poorly designed taxes could hamper consumption and investment,” said Sarah Tan of Moody’s Analytics.

Instead, many suggested progressive tax alternatives that target higher-income earners or specific sectors. These include luxury and wealth taxes, digital services taxes, carbon levies, and reforms in mining and plastic use.

While some acknowledged that new taxes could be introduced as a last resort in case of worsening fiscal conditions, most urged caution. “It makes more sense to improve collection than to impose new taxes,” Ella reiterated.

The Department of Finance has yet to formally propose any major tax package, but with the economic growth rate moderating to 5.4% in Q1 2025, pressure is building to find balanced ways to support public services and manage the deficit.