By Diego Gabriel C. Robles
and Alyssa Nicole O. Tan, Reporter
MEMBERS of Congress are exploring untapped sources of potential funds, ranging from taxes on digital transactions, single-use plastics, and carbon emissions as signaled by economic managers, as well as privatizing government-owned and -controlled corporations (GOCCs) and public land.
Albay Rep. Jose Ma. Clemente S. Salceda backed legislation taxing online transactions, saying that digitization in business processes is outpacing government efforts to tax the activity.
“Digital transactions are getting cheaper by the year, as innovation leads to efficiencies. But our tax collections aren’t keeping pace with the growth in digital sales,” Mr. Salceda told BusinessWorld in a Viber message.
“As more of the bricks-and-mortar economy moves to the digital space, we could see revenue erosion- leading to depleted tax resources for basic services. So, we need to plug that gaping hole,” he added.
“The top 1% of the population consumes 87% of paid digital services, so the effect on the general public will be extremely minimal.”
The Marcos government is seeking new sources of revenue to shrink the fiscal deficit and pay down about P3.2 trillion in additional debt incurred during the pandemic. The Bureau of the Treasury (BTr) has estimated that the government needs to raise P249 billion annually in incremental revenue to avoid new borrowing and reduce the debt load.
The House of Representatives approved in September 2021 a bill seeking to impose a 12% VAT on online advertisements, subscription services, and others. However, the Senate did not approve its counterpart measure.
Senator Sherwin T. Gatchalian said the lack of value-added tax (VAT) in online services makes such legislation necessary.
“Ako sang-ayon ako diyan dahil for example ’pag bumibili ka sa Amazon, walang VAT. Pero ’pag bumili ka sa SM ng kaparehas na bagay, may VAT (I am for taxing the industry because if you buy from Amazon, you won’t be charged VAT, but if you buy the same thing from SM, you will),” he said in an interview with DWIZ radio on Saturday.
“So, lugi naman ’yung mga nagbebenta dito sa atin. Kasi mas mura sa labas at di naman kumikita ang gobyerno (Vendors here face unequal competition because goods sold online are cheaper, and the government earns nothing from their transactions),” he added.
ENVIRONMENTAL TAXES
Congress is also considering taxing activities that have a negative impact on the environment.
The Philippines is one of the world’s largest polluters of single-use plastics because plastics are cheap, Mr. Salceda said.
“Along with the looming effectivity of the Expanded Producer Responsibility Act which would make businesses more accountable for the plastic waste they produce, plastic taxation, the promotion of alternatives, and other non-tax measures are a basket of policy tools we want to enact to reduce our plastic waste,” he said.
“Alternatives to single-use plastics are widely available. Encouraging consumers to bring reusable packaging would actually result in consumer savings of between P200 to P740 per year for the average consumer, since supermarkets and even vendors charge as much as P2 to P3 pesos per bag.”
Mr. Gatchalian, whose family runs a major plastics business and represents Valenzuela, the hub of the industry, said taxes on single-use plastics could have implications on jobs.
“Dapat pag-aralan na mabuti iyan dahil maraming plastic factory sa ating bansa at maraming umaasa dito sa trabaho. Ako aminin ko sa Valenzuela, marami kaming mga plastic factories na marami ang empleyado libo ang kinukuha nila na empleyado (That has to be studied carefully because there are many plastics factories that provide jobs. I will admit that in Valenzuela, we have many plastics factories that employ thousands),” Mr. Gatchalian said.
“So dapat tingnan natin ang anggulo na ’yan, dahil baka naman na mawalan tayo ng trabaho at mataas ang unemployment rate natin ngayon pumapalo ng 6% (We have to consider the employment angle, because the job losses could add to our 6% unemployment rate),” he added.
Mr. Salceda, however, said the developed world needs to do its share in reducing carbon footprints, and the Philippines should not be left to solve the problem using its own resources.
“Without equity from the developed world, who caused and continue to exacerbate climate change, it could be detrimental to our national development,” Mr. Salceda said.
“Even if we curtail our already low per-capita emissions, the global needle will not move (while) our energy and industrialization will get more expensive,” he explained.
Finance Secretary Benjamin E. Diokno last week said the economic team is considering the taxes on digital or online transactions, single-use plastics, and carbon emissions.
Under the previous administration’s fiscal consolidation plan, a P20 excise tax per kilogram of single-use plastics was estimated to generate P1 billion in revenue annually.
On the other hand, a 12% VAT on online advertisement services and other digital and online services was projected to generate P13.2 billion annually.
Antonio A. Ligon, a law and business professor at De La Salle University, said that given the government’s fiscal bind and debt load, “it’s not easy to say whether (we) will avoid new taxes.”
“We cannot avoid new taxes because of the need to pay back our huge debt incurred during the pandemic. Economic growth alone will not be sufficient to raise the necessary revenue,” added economist Bernardo M. Villegas of the University of Asia and the Pacific.
“I support the suggestions about taxing single-use plastic products and digital transactions. The government can also increase sales taxes on luxurious consumption of the wealthy,” he said in an e-mail.
Terry L. Ridon, a public investment analyst and convenor of think tank InfraWatch PH, said that “new taxes should only be limited to segments which do not cover a wide swath of the population, such as sin taxes, gambling, (and) luxury goods.”
PRIVATIZATION
Aside from imposing new taxes, the government should also consider privatizing GOCCs and public land, Mr. Gatchalian said.
“I think privatization was frowned upon in the past. But I think this is an area to raise revenue, considering that the government is probably the biggest landowner in the Philippines,” Mr. Gatchalian said in an interview with the ABS CBN News Channel on Tuesday.
“There are a lot of GOCCs that are inefficient. My concept here is that government should not be in the business of business, government should be in the business of governance. There’s so many GOCCs that can be privatized; let the private sector run it,” he added.
When asked about a specific government asset that is being considered, Mr. Gatchalian singled out the Philippine Amusement and Gaming Corp. (PAGCOR).
“I think PAGCOR is a good company or a good GOCC but the private sector can unlock the value and unlock the potential even further. I think that’s one area that the private sector can participate in.”
“Land is also another privatization opportunity. There’s a lot of land. For example, the old domestic airport. If we move to Bulacan, then the old domestic airport can be privatized for developers to come in,” he added.
The Privatization Council of the Department of Finance declined to comment, telling BusinessWorld the office is still in the process of transition after the new government took over.
Mr. Ligon added: “government should not be doing business because the primary intent of business is to make profit.”
“If we want government asset(s) and corporations to engage in profit-making, then let’s leave it to (the) private sector. Conflicts of interest will be avoided because profitability sometimes is not consistent with social concern,” Mr. Ligon said in a Viber message.
“If privatized, these new private enterprises can also contribute to raising revenue from income and business taxes.”
“In principle, it is better to privatize government corporations that have a business mission. Government should stick as much as possible to regulating monopolies and oligopolies and public utilities, as well as delivering public services such as public education and public health,” Mr. Villegas said.
However, there are only a handful among more than 70 GOCCs that can be privatized as most GOCCs “run special economic zones, airports, large infrastructure projects, or regulate critical sectors such as housing, food and tourism,” Mr. Ridon said.
“These types of GOCC activities cannot be surrendered to the private sector, even at a high premium, because there is a clear public purpose being served by these entities which may conflict with the objectives of private enterprise,” he said.
With PAGCOR in particular, while privatization can raise revenue, its role as a regulator is more important, Mr. Ridon added.