Fiscal Policy in the Philippines
Fiscal policy in the Philippines primarily involves manipulating taxes and government expenditures to stabilize the economy. Despite continuous debt accumulation and budget deficits, the country has experienced some improvements in fiscal management in recent years.
Revenue and Funding
The government earns revenue through taxes (mainly income tax) and non-tax sources such as fees and privatization proceeds. The biggest contributor to tax revenue is the Bureau of Internal Revenue. The Expanded Value Added Tax (E-VAT) is a significant indirect tax imposed on goods and services. Income tax rates are progressive, with higher earners paying a greater proportion of their income.
Spending, Debt, and Financing
In 2010, government spending exceeded revenue, leading to a budget deficit. The government finances this deficit through a combination of domestic and external sources, including loans, bond issuance, and foreign currency reserves. The country has reduced its dependency on external sources in recent years to mitigate risks from global exchange rate fluctuations.
Historical Context
The Marcos administration (1981-1985) heavily relied on indirect taxes and government spending on infrastructure, leading to fiscal deficits. The Aquino administration (1986-1992) implemented tax reforms to simplify the system and increase tax effort. The Ramos administration (1993-1998) experienced budget surpluses due to asset sales and foreign investment, while the Estrada administration (1999-2000) faced deficits due to a decrease in tax effort and debt repayment.
The Arroyo administration (2002-2009) inherited a poor fiscal position, but implemented reforms to increase tax revenue and reduce the national debt-to-GDP ratio. The administration also introduced the E-VAT, which generated substantial revenue. The Philippines has seen improvements in microfinance management and has taken steps to strengthen its debt management efforts in collaboration with other economic entities.