Department of Finance Secretary Ralph Recto is not keen on proposals to cut the Value-Added Tax (VAT) from the current 12 percent to 10 percent.
“I’m sure that those who have filed a bill all have well intentions. Having said that, at this point in time, if you do, I leave it to Congress — if you pass a bill, my warning will be that there will be a possible credit rating downgrade. And why is that? Because today, tignan lang ninyo ah, next year, what we will collect from VAT, BIR, and BOC will roughly be ₱1.5 trillion. The salaries alone of our employees amount to ₱1.7 trillion. So, the total VAT collection is not even enough to pay for the salaries of all our employees,” Recto told the Senate Finance Committee.
“Lahat ng capital outlay natin — ibig sabihin, lahat ng tulay, kalsada, school building, hospital — inuutang natin. So kung magbabawas po tayo ng revenue, baka pati ang current operating expenses natin, uutangin na rin natin.“
Recto said the government can afford not to reform the pension for military and uniformed personnel, at least for next year.
“So ngayon, I can say that we can afford it, okay? Without doing the reform. Ang gastos ngayon for 2026 — that’s for next year — is ₱133.9 billion for the pension alone,” he said.
The Finance shied added: “As I mentioned earlier, the rate of increase is not that significant. In terms of the budget that I’m looking at, it is ₱132 billion this year. It will roughly be ₱134 billion next year. So, ₱2 billion lang ang increase. I think it is still bearable. Like I said, if we adopt the MUP, nadadagdagan yung gastos ng ₱45 billion.”
Recto also urged lawmakers to include the assets of government agencies with military and uniformed personnel in the coverage of the MUP pension reform bill so it will pay for itself.
He explained that reaping the benefits of the MUP pension reform will take time even if the government already spends money.
“Halimbawa, kung gagawin natin yung MUP reform bill, gagastos tayo nang dagdag na kulang-kulang ₱141 billion in the next three years. Samakatuwid, mga ₱40, ₱35 billion or more — ₱40 to ₱45 billion taon-taon ang dagdag gastos. And before we get the benefits from it, it will take time — 40 years bago makuha natin yung benepisyo.“
“So unless some of those assets were incorporated, it would not affect our fiscal position so much.”
Recto also bared that military personnel’s salaries could be increased by raising subsistence allowances, which are non-taxable.
Recto told lawmakers to no longer include a provision in next year’s budget that authorizes the government to tap the excess funds of PhilHealth. (ABS-CBN News)
