Policy stance: Prioritizing enforcement over tax holidays
Department of Economy, Planning, and Development (DEPDev) Secretary Arsenio M. Balisacan underscored a clear preference for tightening the grip on existing tax measures rather than introducing new reliefs such as tax holidays or lowering the 12% value-added tax (VAT). Speaking at the European-Philippine Business Dialogue (EPDB) during the European Chamber of Commerce of the Philippines, Balisacan argued that preserving revenue streams is essential for the country’s medium-term fiscal program (MTFP).
“What we want to avoid are any measures that erode our revenues,” Balisacan told reporters on Oct. 16, emphasizing that the government’s focus should be on enforcement and implementation of tax measures already in place. He added that strengthening these mechanisms would help the country achieve the MTFP goals and maintain fiscal stability.
Digitalization as a core strategy
Beyond enforcement, Balisacan highlighted a major thrust of the Marcos Jr. administration: full digitalization of tax collection and administration. The aim is to reduce face-to-face interactions between taxpayers and revenue officers, thereby simplifying payments and enabling remote transactions from homes or offices. He described the digital push as a big step toward making tax compliance easier and more efficient, while also reducing opportunities for leakage or evasion.
MTFP objectives and macroeconomic links
The DEPDev secretary stressed that the broader objective is to ensure that the MTFP’s targets for debt reduction and a declining budget deficit as a share of GDP are met. Balisacan noted that deficits and debt levels are closely watched by both domestic and foreign investors and by credit rating agencies, given their impact on macroeconomic indicators such as interest rates.
Recent fiscal data show a widening deficit: as of end-August, the national government’s fiscal deficit rose 24.7% to ₱869.2 billion from ₱697 billion in the previous year’s period. The Bureau of the Treasury (BTr) said the year-to-date deficit remains within the ₱1.56-trillion full-year program and accounts for about 55.7% of the target. The government is targeting a deficit of 5.5% of GDP for the year, with a gradual path down to 3.1% by 2030 as outlined in official projections.
Debt dynamics and near-term outlook
Debt management figures have shown some improvement: outstanding government debt declined to ₱17.47 trillion in August from a peak of ₱17.56 trillion in July, aided by settlement of more than half a trillion pesos in local bonds and a stronger peso. Finance Secretary Ralph G. Recto and National Treasurer Sharon P. Almanza recently voiced confidence in hitting the end-2025 debt target of ₱17.36 trillion. Looking ahead, BESF data for FY2026 warn of a possible breach above ₱19 trillion by year-end, a scenario that would necessitate careful policy calibration to avoid eroding fiscal resilience.
Legislative proposals in play
The fiscal debate is also playing out in Congress. As lawmakers propose relief measures—Senate Bill No. 1446 (One-Month Tax Holiday of 2025), House Bill No. 4302 (VAT Reduction Act to 10%), and HB 5119 (outright VAT repeal)—the administration reiterates its stance: any relief should not undermine revenue collection or undermine the MTFP.
Balisacan’s remarks suggest that, in the near term, the path forward favors tightening enforcement, expanding digital tax services, and maintaining prudent fiscal targets, rather than proceeding with tax holidays or VAT reductions that could jeopardize budget discipline.
What this means for taxpayers and investors
For taxpayers, the emphasis on digitalization could translate into more convenient, remote tax filing and payments, potentially lowering noncompliance friction. For investors, the continued commitment to MTFP targets and debt sustainability signals a stabilizing macroeconomic environment, even as it defends revenue integrity against short-term relief measures.
Conclusion
As debates over tax relief intensify, Balisacan’s call to strengthen enforcement and digitalize tax administration anchors the government’s stance on fiscal prudence. By prioritizing revenue integrity and MTFP commitments, officials aim to maintain macroeconomic stability, while eyes remain on upcoming data and policy developments that will shape the country’s debt trajectory and growth outlook.
