Balisacan warns vs tax cut tradeoff

Reducing taxes to preserve Filipino purchasing power remains a delicate balancing act for the government, according to Arsenio Balisacan, secretary of the Department of Economy, Planning, and Development (DEPDev).

Speaking to reporters last Thursday on the sidelines of the press conference announcing the dismal first-quarter gross domestic product (GDP) growth figures, Balisacan said that while he supports measures aimed at helping lower- and middle-income groups, potential tax cuts could hurt government revenues and constrain state programs designed to assist vulnerable sectors.

“Well, reduction of taxes is a ticklish issue for economic managers because our people want better infrastructure, more schools, more hospitals, more services,” he said.

“And if you remove those taxes, how are you going to support those important critical projects that are especially needed by the poor and low-income groups? So, we always urge Congress that if they have to remove a tax, they have to find a way of generating replacement revenues for those.”

Filipino consumers continue to bear the brunt of the spillover effects of the Middle East conflict. Headline inflation surged to 7.2 percent in April—four times higher than the end-2025 level and the highest in three years—as oil prices, transport costs, and food prices climbed. Government officials and analysts alike have pointed to the global oil shortage as the primary catalyst, while Emilio S. Neri Jr., lead economist of the Bank of the Philippine Islands (BPI), warned that inflation could reach double digits by the end of the year if the conflict drags on.

Meanwhile, National Statistician Claire Dennis Mapa said Filipino purchasing power has declined by about 37 percent, with P1 in 2018 now worth roughly 73 centavos, likewise attributing the erosion to rising inflation.

The government has rolled out mandated fuel price rollbacks and subsidies for the transport and agriculture sectors. Last month, President Ferdinand Marcos Jr. also ordered the suspension of excise taxes on LPG and kerosene as pump prices surged, a move the Department of Finance (DOF) said would result in roughly P43 billion in foregone revenues—concerns that Balisacan echoed on Thursday.

“I am in favor of reducing taxes, especially those that burden the poor and the middle class, but we have to find replacements for much-needed tax revenues. Unless we are able to do that, what you remove might actually hurt the very groups you are trying to help,” he said.

Taxation accounted for approximately 86 percent of government revenues as of 2024. The Bureau of Internal Revenue (BIR) was hit last year by allegations of an agency-wide kickback scheme, with new commissioner Charlito Martin Mendoza implementing reforms aimed at improving transparency within the agency.

Surveys conducted by Social Weather Stations (SWS) and Pulse Asia indicate widespread belief among Filipinos that tax revenues are often lost to corruption or pocketed by politicians.

Meanwhile, Balisacan added that the Development Budget Coordination Committee (DBCC) will convene sometime this week, noting that a downward revision of the country’s GDP growth target range amid the Middle East crisis would be “a foregone conclusion.”

“Our program is dynamic. We have to adjust when the situation changes,” he said.

“You can't keep persisting on something that's no longer attainable. The world has changed so much since last year, so we have to reflect that in our growth assumptions and other projections.”