The Department of Finance (DOF) is putting the final touches in its fiscal consolidation plan for the next administration, underscoring the need to outgrow the country’s pandemic-induced debt.
Carlos Dominguez, DOF secretary, said in a virtual event yesterday first on the list of the next presidency is outgrowing the country’s debt at the soonest possible time its share in relation to the gross domestic product (GDP), the ratio of which spiked to 60.5 percent in 2021, from a historic low of 39.6 percent in 2019.
The government had to resort to emergency borrowings, he said, to cover the massive cost of COVID-19 response and the corresponding drop in revenues resulting from the mobility restrictions and economic slowdown spawned by the global outbreak of the disease at the onset of 2021.
“The only way to make this sustainable is by growing the economy faster and investing in the future. The fiscal deficit should be lowered to cover only infrastructure investments and not operational expenses,” he said in his speech during the second general membership meeting of the Financial Executives Institute of the Philippines.
Dominguez said the second priority of the next administration should be to quell food inflation by accelerating the liberalization of the agriculture sector.
Third, Dominguez said, the next presidency should strive to reduce poverty incidence, which reached 23.7 percent in the first semester of 2021 because of the pandemic.
Dominguez also said the fourth concern that should top the incoming administration’s must-do list is the mounting problems associated with climate change–and the huge cost this entails–without having to strain the country’s fiscal resources.
Meanwhile, Dominguez was also asked during the event about his position on wealth tax, to which he reiterated that he is not in favor of it.
“I am against wealth tax because first of all, just look at the experience of some European countries. The real wealth tax in the Philippines… is real estate tax. That is the kind of thing you can tax because nobody can hide that and nobody can take it away to elsewhere – that’s land,” he added.
Dominguez said local governments are in the best position to implement the real effective wealth tax, which is tax on real estate, as it is local governments which does the assessment of the value.
“Yet it does not get done because local mayors and provincial governors do not want to be kicked out of office. But that is not a national issue. That is a local issue, according to the administrative code. That should be addressed. That’s why we have that proposal, it’s part of our tax reform. Basically to say that, let’s assess property in accordance with international standards,” Dominguez said. Angela Celis
