Accessibility links

Philippine President Warns of Economic Pain Without New Taxes - 2004-09-21


The Philippine president is warning that her country risks what she called a "painful economic death" within two years unless taxes are raised.

President Gloria Arroyo says the government needs about $3 billion more in annual revenue to ease its debt, which equals 71 percent of gross domestic product, among the highest in Asia.

Ms. Arroyo has asked Congress to pass tax laws that would raise at least $1 billion a year. Without the pain of a tax increase now, she warned in news interviews, the country faces greater economic distress in a few years.

Song Sen Wun, an economist at Singapore investment bank, G.K. Goh, says the president's request is an "easy way out" for reducing the budget deficit. He says the government should instead focus on improving its tax collection.

"Their problem is collecting taxes," he explained. "That's really the key. It could be implementing a system where people can be taxed and taxes can be collected very quickly. Once you find that, you will realize that you do not necessarily have to impose new taxes."

Mr. Song says the Philippine government has been especially ineffective in collecting taxes from the rich, many of whom use political ties to avoid paying taxes.

In a recent speech, Ms. Arroyo gently urged the nation's rich to help head off a crisis.

"Indeed, many of you helped get me elected president," she said. "Thank you for that. And now it's my obligation to you to lead with honesty. It's my obligation to you not to sugarcoat the truth about our economy in which you have been such valuable leaders."

Congressman Joey Salceda says the government's interest rate payments have risen to one-third of its budget and that means there is less money for social services and infrastructure development. He says new taxes are key to cutting the deficit.

Critics argue that the new revenue will be wasted, but Mr. Salceda says the government wants to avoid that problem.

"We're using some spending cuts if only to allay the people's fears that this money will just go to waste through inappropriate spending," he added.

Mr. Salceda says the Philippines is in a fiscal crisis because of the government's inability to balance its budget.

XS
SM
MD
LG