MANILA, Philippines – High income inequality is still widely prevalent in the Philippines and government must collect more taxes from the country’s conglomerates to narrow the gap and boost revenues, the International Monetary Fund (IMF) said.
The Washington-based fund said the government has achieved progress on the fiscal front but still needs to improve tax administration, cut tax exemptions and broaden the tax base further to boost revenues.
“As we discussed, there are still issues related to inequality. There is still very high poverty. Those issues you need to tackle in the medium term,” Naoyuki Shinohara, deputy managing director of IMF told The STAR in an interview on the sidelines of the World Economic Forum on East Asia.
While he lauded reforms and progress achieved on the fiscal front, he said the government must raise taxes slapped on conglomerates.
“I think what is important is to strengthen the tax administration, broaden the tax base by eliminating various exceptions. Get more cooperation from conglomerates. Tax administration needs to be stronger,” he said.
He said that generally, increasing income tax is better than relying mainly on value added tax (VAT).
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He also said the government must fight smuggling to plug revenue leakages.
“Your government is carrying out prudent fiscal policy. The budget deficit is under control. There’s not much concern on that level,” he said.
The National Government fiscal deficit for the first month of 2014 stood at P34.2 billion, an indication of the government’s increased spending for reconstruction and rehabilitation in the wake of recent natural disasters.
This deficit is 75 percent or P14.7 billion higher than comparable January 2013 figures of P19.5 billion.
The Bureau of Internal Revenue collected P104.2 billion in January, higher by 10 percent compared to P94.7 billion in January last 2013.
Shinohara said the problem of high inequality is not exclusive to the Philippines as it is still prevalent across the region.
Nevertheless, he lauded the government’s Conditional Cash Transfer Program, saying that this is one measure by which countries could narrow the gap between the rich and the poor.
“We have started working on cash transfer mechanism. It’s not an easy scheme. But it’s a good measure to close the gap,” he said.
