What should President Aquino do when his “no-new-tax” policy gets in the way of meeting his administration’s goal of achieving sustained. strong, and inclusive growth? What should he do when this inappropriate tax policy gets in the way of creating the fiscal space needed to prepare the country for future crises and disasters? The sensible response is to reconsider — quickly and decisively.
Most knowledgeable analysts agree that the President’s “no-new-tax” policy is getting in the way of his promised 7 to 8% economic growth. His administration simply does not have the resources to deliver on the needed public infrastructure (despite the promise of public-private partnership initiative), on social spending (K+12 basic education, universal health care, expanded cash transfer program, modern armed forces, and others).
The medium-term fiscal outlook is not promising. After a brief gain this year (largely because of a small budget that was asked by the President and approved by Congress), budget deficits are likely to soar in future years, reaching as high as 5 to 6% from 2012 to 2016.
I have done a first-order approximation of how the national government medium-term budget (from 2011 to 2016) would look like under conservative spending assumptions but with unchanged tax structure.
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