Nothing is certain, except Marcos Jr. and taxes

The little guys have to pay the big bucks. (Photo: Financial Times)

It’s official. Ferdinand ‘Bongbong’ Marcos Jr. is now the 17th president of the Philippines. And, it is also official that he finally has some plans for the Philippine economy. Sort of. 

In an interview with select members of the media, Marcos Jr. named Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno as the next Finance secretary of the Philippines. This comes as a relief after having little to no communication with regards to the new administration’s economic plans. 

"As finance secretary, I will strive to continue prudently and carefully balancing the need to support economic growth, on one hand, and to maintain fiscal discipline, on the other,” Diokno said in a statement. 

Marcos Jr. mentioned that his focus would be addressing inflation woes and job generation in the country. Considering that the Philippines has recently recorded a massive drop in the unemployment rate since February 2022, owing mostly to moving majority of the areas to alert level 1, it’s only right that the government rides on the momentum. We can’t afford losing it anytime soon. 

And it’s looking like Marcos Jr. already has his work cut out for him as the Development Budget Coordination Committee (DBCC) announced that inflation is expected to be around the 3.7%-4.7% range which is already exceeding the 2-4% target. 

The uptick is once again attributed to disrupted supply chains due to the Russia and Ukraine conflict. This is a narrative that we’ve seen before and we sure won’t be seeing the end of it anytime soon. 

I can barely fill up my gas tank nowadays. Maybe this time next year, I’ll have to resort to walking everywhere I go. 

As of now, the DBCC is looking at the growth of Philippine gross domestic product (GDP) to be within the parameters of 7%-8%. The previous expectation was 9%. Lowering goals is a great way to avoid disappointment in the end. I guess.

Suck it up

Speaking of disappointment, Finance Secretary Carlos Dominguez III said that if we are to pay off the outstanding amount of debt the Philippines has due to the prolonged COVID-19 pandemic, we’re going to have to pay more taxes. 

A proposed fiscal consolidation and resource mobilization plan done by the Department of Finance (DOF) will be pitched to the economic team of Marcos Jr.’s administration. It is supposed to be a “doable” set of measures that are “fair, efficient, and corrective”. I can tell you right now, I don’t think cutting more money off of my salary isn’t very “doable” for me. 

DOF Undersecretary Valery Brion gave a wonderful piece of information that if it wasn’t for COVID-19, the Philippines’ outstanding debt would “only” be P9.9 trillion by the end of this year. Because of the ’Rona we’re now sitting on a whopping P13.1 trillion. 

Brion said that we would need to raise P249 billion every year to have a chance at paying off our debts. Raising taxes has already been in the conversations early this year, since we were all so eager to have some form of normalcy back after 2 years of being locked inside. 

DOF estimates that the Marcos Jr. administration can raise P349.3 billion each year if they commit to implementing 3 packages of tax reforms from 2023 all the way to 2025. 

Some of the proposed actions include removal of certain VAT exemptions, imposing VAT on digital service providers, a mandatory casino admissions charge at a flat rate of P3,500, and a 5% tax on gross gaming revenues, an increase in oil excise taxes by P1 per liter for at least 3 years, taxing any cryptocurrency and related transactions, and so much more. 

Brion warned that “If no reforms are introduced or the reforms are diluted, there will be two scenarios ultimately leading to the same outcome: a fiscal and economic crisis, as a result of higher debt, lower socioeconomic spending, and fewer investments,”.

When asked what about the Filipino households who might be struggling to pay any of the increased prices, Dominguez answered with “There are immediate consequences, and there are long-term consequences. If you don’t do it [fiscal consolidation], the long-term consequences may be even worse.”

So basically, they’re charging us for more stuff, deal with it. Try telling that to my wallet.