As a number of bills to exempt sugar and other goods from value-added tax (VAT) have been submitted in Congress, House Ways and Means Chair Joey Sarte Salceda cautioned against the unexpected implications of VAT and other tax cuts.

“It’s going to make things worse, not better. When the British government announced its largest tax cuts in 50 years, the British pound also slid to all time lows against the dollar. That’s because tax cuts cast a shadow of doubt on the ability of a state to maintain its operations and honor its debts,” Salceda emphasized in a statement on Thursday.

“Peso weakness is not yet our fault – we’re still fundamentally strong, and in any case the peso is getting stronger against other major currencies like the yen, euro, or the pound. But the moment we cut taxes, the resulting peso weakness will be our fault.”

“We will have to pay more pesos for our imports, and our imported inputs, like fuel, will also be more expensive in peso terms. So, we have to be careful about a VAT cut,” he said.

The Committee would look into the proposals to exempt some goods from the VAT, he said, but “we are of the disposition that the government needs more, not less revenues.”

“We have also committed to the President that all expenditures, spending or tax, will have to be matched by corresponding new revenues. And the current proposals are not backed by new sources.”

Go For Fertilizer Subsidies Instead

Instead, he feels that the government should concentrate on “fertilizer subsidies to help address our food supply difficulties,” according to the representative of Albay’s second district.

“Good fertilizers are still the most cost-effective way to increase food supply, even despite higher fertilizer costs. It will increase farm input costs by around 6-12%, but it increases yield by around 65%. I would urge PBBM (President Ferdinand Marcos Jr.) to focus on this intervention. I would also urge my colleagues to help find ways to fund more farm input support for farmers, instead of tax cuts.”

Because structural food constraints would still exist even if taxes were reduced, he said, “and worse, we won’t have the money to deal with them.”

Salceda added that in order to find further ways for the Philippines to reduce inflation, while enhancing food security, he will also be having a number of discussions with peers in agricultural agencies in Thailand, Taiwan, and other nearby countries.

“I’ll be reporting to the President on these conversations soon,” he, who has been traveling to Association of Southeast Asian Nations countries to meet investment managers and government leaders during the session break, said.

Photo Credit: Department of Agriculture Official Website