The urgent challenge for the new Aquino administration is to increase revenues, but research group IBON urges government to place the burden of adjusting to the fiscal crisis on those that have the greater capacity to pay.
The new Aquino administration is faced with a serious fiscal crisis that could deteriorate rapidly or compel severe austerity if the revenue effort does not quickly improve. The first quarter deficit is already at 8.4% of the gross domestic product (GDP) from 7% of GDP in the first quarter of 2009.
IBON said that being a new administration, the Aquino government enjoys a measure of goodwill, and it can translate this to revenue generation measures that will not burden the public. Among these measures are restoring the import tariffs to their 1993 levels, or at 5.6% of the gross domestic product (GDP). This will create an estimated revenue of P427 billion, instead of the P220 billion generated in 2009 (at 2.9% of GDP).
Another measure is restoring the corporate income tax from 30% to 35 percent, which will generate an estimated revenue of P16 billion for the government. This is possible because top corporations saw a 20%-increase in their 1st quarter 2010 profits. Moreover, the top 1,000 corporations registered a profitability rate of 11.7% in 2007 from 3.2% in 2001.
According to IBON, the supposed 36 straight quarters of GDP growth trumpeted by the past government has not been accompanied by corresponding increases in real jobs and decent wages, further deepening poverty while expanding the wealth of those in the top income deciles. Amid rising poverty and increasing incomes of the corporations and individuals, the Aquino government can therefore look into increasing wealth taxes such as on high value real estate, luxury goods and services, and others.
IBON said that the Aquino government is in a good position to establish democratic instincts including implementing pro-poor measures in managing the fiscal crisis. This would be more productive instead of considering conventional approaches such as removing rice subsidies, increasing taxes, etc.