CREDIT RATING AGENCY (S&P) UNIMPRESSED WITH RP TAX REFORMS
MANILA, February 23, 2005 (STAR) Credit ratings agency Standard & Poor’s said yesterday it remains disappointed at the slow pace of fiscal reforms in the Philippines, suggesting it is unlikely to reverse a ratings downgrade made in January.The agency last month lowered its credit ratings on the Philippines by one notch, citing concerns over a chronic budget deficit and delays in the government getting legislation to raise tax revenues through Congress.
In a report yesteday, S&P said a "qualitative shift in revenue mobilization capability remains absent" in the Philippines.
"Progress on proposed tax measures aimed at effecting such a shift (in revenue mobilization) has been disappointing. Only two of eight laws proposed by (President Arroyo) in June 2004 had been passed and signed into law by January 2005," it said.
"As a result, the main revenue-collecting organ, the Bureau of Internal Revenue (which accounts for 70 percent of revenues) has underperformed its 2004 target by about 10 percent and only the Customs and Treasury departments have exceeded their respective targets."
S&P said a proposed increase in valued-added tax (VAT) to 12 percent from 10 percent recently approved by the House of Representatives could improve the government’s revenues.
However, the VAT hike bill still faces stiff opposition from several sectors and senators.
Last week, Moody’s Investors Service announced a surprisingly tough two-notch downgrade of its sovereign ratings on the Philippines, citing concerns over the large build-up in public debt.
Meanwhile, brewing tension between the two chambers of Congress over the controversial VAT finally boiled over yesterday after ranking lawmakers accused senators of not only violating the Constitution but also risking another debilitating credit rating downgrade for the country.
This developed as an all-party caucus was held yesterday where it was agreed that the House would not budge on its proposal to increase VAT from 10 to 12 percent and lift exemptions on six sectors.
It was also agreed that the House would try to approve last night the bill lifting exemptions on independent power producers, petroleum products (except LPG), raw materials for petroleum products, oceangoing vessels, medical and legal services.
Tarlac Rep. Jesli Lapus and Ilocos Sur Rep. Eric Singson, chairman and vice chairman respectively of the House committee on ways and means, said in separate interviews that the senators were "complicating things" by rejecting the 12-percent VAT hike.
Singson said senators not only rejected the VAT increase, they also suggested a higher corporate income tax take and expanded exemptions on the individual income tax when the subject is still undergoing plenary deliberations in the House.
"The senators must be reminded that it is very clear in the Constitution that the tax bills must emanate from the House and the Senate can only concur or introduce amendments," he said. – AFP, Paolo Romero
Reported by: Sol Jose Vanzi
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