The country’s economic managers have revised their medium-term fiscal program for this year until 2022 as they continue to observe prudent fiscal management.
In a joint statement on Thursday night, the interagency Development Budget Coordination Committee (DBCC) said estimated revenue collections for this year had been hiked from P2.52 trillion to P2.85 trillion, equivalent to 15.7 percent of the country’s gross domestic product (GDP).
Budget Secretary Wendel Avisado explained in a briefing that the new revenue target took into account the above-target performance of the Bureaus of Internal Revenue and of Customs since July.
Revenue estimates for 2021 and 2022 were also raised to P2.88 trillion and P3.31 trillion, respectively, from their previous outlook of P2.71 trillion and P3.03 trillion.
“The adjustments already factor in the expected impact from the implementation of the Create bill, as passed by the Senate,” Avisado said.
Formally known as Senate Bill 1357, or the Corporate Recovery and Tax Incentives for Enterprises Act, Create is the latest version of the second package of the government’s Comprehensive Tax Reform Program.
It provides an outright 10-percentage-point cut in the country’s corporate income tax (CIT) rate, lowering it from 30 percent to 20 percent for local businesses with net taxable income equivalent to P5 million and below, and with total assets (excluding land) not exceeding P100 million. Other corporations will benefit from their CIT rate being lowered to 25 percent from 30 percent.
The measure also modernizes fiscal incentives by making them performance-based, targeted, time-bound and transparent.
Meanwhile, the DBCC members said projected disbursements for 2020 were expected to reach P4.23 trillion, lower than the P4.33 trillion projected in July. The revised figure is equivalent to 23.3 percent of GDP and 11.5 percent wider the actual P3.79 trillion in 2019.
For 2021 and 2022, the total disbursement program is pegged at P4.66 trillion (23.4 percent of GDP) and P4.95 trillion (21.9 percent of GDP), respectively.
Given the revised revenue and disbursement programs, the economic managers downgraded the government’s budget deficit program to 7.6 percent of GDP from its earlier ceiling of 9.6 percent.
They also adjusted the fiscal gap program for 2021 and 2022 to 8.9 percent and 7.3 percent, respectively, from the previous 8.5 percent and 7.2 percent.
Avisado said the DBCC’s deficit ceiling was designed to balance the requirement of
supporting economic recovery while keeping the country’s debt-to-GDP ratio under a sustainable threshold.
“We will not abandon the prudent fiscal management set by President [Rodrigo] Duterte when he assumed office in 2016 and put us in a good fiscal position ahead of the pandemic,” he added.
The Budget chief also said the proposed 2022 cash budget was set at P5.024 trillion, consistent with the macroeconomic assumptions and foregoing fiscal targets. This is 11.5 percent higher than the 2021 National Expenditure Program and is equivalent to 22.2 percent of GDP.
“The proposed 2022 national budget will continue to prioritize funding for health-related responses and measures that will help accelerate economic growth,” he emphasized.
The interagency panel now expects the Philippine economy to fall by -8.5 to -9.5 percent on account of the prolonged coronavirus disease 2019 pandemic-related lockdowns in the country.
The DBCC is made up of the Department of Budget and Management, Department of Finance, and the National Economic and Development Authority.