Shoring up revenues over tax holidays
In a recent public briefing, DEPDev Secretary Arsenio M. Balisacan signaled a clear preference for tightening enforcement of existing tax measures rather than granting new tax holidays or pursuing immediate VAT reductions. Speaking on the sidelines of the European-Philippine Business Dialogue, he argued that preserving and strengthening the revenue base is essential to the government’s medium-term fiscal program (MTFP).
“What we want to avoid are any measures that erode our revenues,” Balisacan told reporters on Oct. 16. The emphasis, he said, is on improving the enforcement and implementation of current tax rules to ensure the MTFP’s targets are met, rather than offering temporary relief that could undermine fiscal stability.
Digital push to simplify and secure tax collection
Balisacan highlighted the administration’s drive toward full digitalization of tax collection and administration. The goal is to reduce face-to-face interactions between taxpayers and revenue officers and to make paying taxes easier from home or office. He stated that this digital push is a cornerstone of the broader effort to strengthen compliance, minimize administrative gaps, and improve real-time data for policy decisions.
Digitalization is framed as a long-term solution to revenue collection that aligns with macroeconomic goals. A more efficient, transparent tax system not only supports MTFP goals but also helps maintain favorable credit outlooks from both domestic and foreign investors who closely watch deficits, debt levels, and sustainability indicators.
MTFP goals vs. new tax relief measures
As debt management and budget discipline remain priorities, the government is balancing near-term needs with long-run prudence. Secretary Balisacan noted that the MTFP includes goals to reduce deficits relative to GDP and to bring down the national debt path. In this context, he warned against policies that could widen the deficit or raise the debt burden, even temporarily through tax holidays or VAT cuts.
Recent legislative moves proposing a one-month tax holiday and VAT reductions have spotlighted the debate over short-term relief versus long-term stability. Senator Erwin Tulfo’s SB No. 1446 proposes a One-Month Tax Holiday of 2025, while House bills aim to cut VAT to 10 percent or even eliminate it. Balisacan’s stance suggests that any relief measures should be weighed against potential impacts on the revenue base and debt trajectory.
Fiscal fundamentals: deficits, debt, and macro stability
Data from the Bureau of the Treasury show that the national government’s fiscal deficit widened by 24.7 percent to ₱869.2 billion by August, underscoring pressures from faster spending growth. Yet overall fiscal metrics remain within the year’s revised program, with the deficit projected to narrow over the medium term as consolidation and revenue collection improve.
National debt trends remain a focal point for policymakers. August figures showed a slight contraction to ₱17.47 trillion, aided by bond maturities and a firmer peso. Nonetheless, projections for 2026 and beyond indicate a higher debt path if revenue-enhancing reforms stall or if tax relief measures are enacted without offsetting savings.
Investor confidence and policy clarity
For both domestic and international investors, the clarity of the government’s fiscal framework matters as much as the numbers themselves. Balisacan’s comments underscore a calibrated approach: protect the revenue base, expand digital administration, and maintain a credible path toward debt stabilization. The message is that fiscal sustainability and macroeconomic stability support a healthier investment climate, even as policymakers debate targeted relief measures.
As discussions around tax policy intensify, the administration appears set on a path that prioritizes enforcement and modernization over broad-based relief. The coming months will reveal whether proposed bills on tax holidays and VAT reductions will be reconciled with a robust, digitally empowered tax system that upholds MTFP commitments.
