Sound fiscal measures will buoy RP
amid US financial crisis - Angara

Senator Edgardo J. Angara today said that instituting sound fiscal measures will cushion the perceived impacts of the US financial turmoil to RP's economy.

This is amid the looming financial crisis in the US following the events on Wall Street, where global investment bank Lehman Brothers filed for bankruptcy protection and rival Merrill Lynch agreed to be sold to Bank of America for $50 billion.

In the Philippines, local stocks plunged triple digit for the second day, following investors' reaction over the fall of Wall Street financial giants.

"In order to cope with the challenges of a slowing global economy and escalating food and fuel prices, the government must strengthen its macroeconomic policies both by rationalizing fiscal incentives and curbing tax evasion," said Angara, who chairs the Senate Committee on Banks, Financial Institutions and Currencies.

He added, "I am in favor of granting fiscal incentives to encourage direct investments in the country, especially if it will develop the country's economy. Pero minsan inaabuso na tayo (But sometimes our policy is being abused). That's why we have to set the parameters of fiscal incentives in the country."

This includes the rationalization of the incentive schemes and review of the tax waivers and tax breaks that the government give away every year. He added that the country is losing a quarter of billion pesos from tax waivers and breaks.

He further called on for the review of industries that do not need tax breaks and the redirection of revenues from income-generating agencies such as Philippine Amusement and Gaming Corp., the Philippine Charity Sweepstakes Office, the Ninoy Aquino International Airport Authority, and the Philippine Tourism Authority, among others.

"Their income can amount to over a billion pesos, and these can build all the schools and buy all the books that we need. Philippine competitiveness has steadily and consistently slipped as a result of our measly investment on education, health, research and development and basic infrastructure. We need to step up public spending in these areas," he said.

Asian Development Bank, through its economic report Asian Development Outlook (ADO) update, stated yesterday that expanding the country's tax revenue base and posting a higher revenue growth will result to achieving global investors' confidence and will allow greater expenditure on infrastructure and development.

These fiscal initiatives, according to ADO, will cushion the negative impacts of the US crisis and provide RP a better position to respond to this crisis.

Angara is also pushing for the removal of the automatic guarantee by the national government of loans secured by government-owned and controlled corporations. He cited NFA which has an estimated 50 billion in outstanding loans, worse, NFA officials do not care on how to find ways of repaying the loan because the government has guaranteed it. Under the present system, GOCCs credit worthiness is not reviewed prior to approval of the loan.

"If you improve tax administration coupled with the improvement of the financial system, your tax base would become broader and your tax effort will be on autopilot. By being wise and discriminating about granting fiscal incentives, we encourage direct investments in the country which will bolster the country's economy amid the recent financial turmoil in the US," said Angara.