Finance Secretary Ralph G. Recto has underscored that whatever measures by the Department of Finance (DOF) to source financing for public programs and projects are always guided by the principle that they will never compromise the government’s ability to meet the primary needs of Filipinos.

“Because that is our job at the DOF – to raise money for the government in the most cost-effective manner and make sure that it is most judiciously used and spent,” he said in his keynote address at the Foundation for Economic Freedom (FEF) General Membership Meeting and Election on September 4, 2024.

Upon assumption as DOF Secretary in January 2024, Secretary Recto immediately recalibrated the country’s Medium-Term Fiscal Program—covering revenue, financing, and growth targets—to ensure that it aligns with current realities and adapts to external shocks such as geopolitical tensions.

The refined program now follows a growth-enhancing fiscal consolidation path to reduce deficit and debt gradually in a realistic manner while creating more jobs, increasing incomes, and decreasing poverty in the process.

In order to fund this year’s national budget of PHP 5.77 trillion, which is only supportable by PHP 4.27 trillion in revenues, the DOF has pursued prudent and strategic means to scout for more resources.

“[T]he DOF has to collect 11.71 billion pesos a day in revenues to support our average daily spending of 15.80 billion pesos. This leaves a 4.10 billion-peso hole a day that must be plugged by debt,” the Finance Chief stressed.

“The temptation to impose additional taxes is there. But in the face of high inflation in the last two years, we chose other means of revenue generation that will not unduly burden ordinary Filipinos,” he added.

This year, the DOF hiked the government-owned- or controlled corporations’ (GOCCs) dividend remittance rate from 50% to 75% of their earnings.

On top of this, the DOF is strategically disposing of non-performing and idle government assets through privatization.

“These are now among our major sources of non-tax revenues,” the Finance Chief said.

Against its target of generating about PHP400 billion in non-tax revenues in 2024, the DOF has already collected PHP 368.80 billion from January to July. This is 44.5% higher than the same period last year.

Meanwhile, the Bureau of Internal Revenue (BIR) and Bureau of Customs (BOC) have stepped up with higher collection performances through their respective digitalization programs and coordination with other agencies.

The BIR, in particular, is adapting its tax system to capture the e-commerce market to ensure that it will be able to collect rightful revenues from new business models.

“In addition, we have been inculcating tax obedience by promoting ease of payment not just through digitalization, but by showing that taxes that are efficiently collected are effectively spent,” Secretary Recto said.

As a result, tax collection grew by 11% in the first seven months of the year, reaching PHP 2.24 trillion.

This drove total revenue collections to grow by 14.8% to PHP 2.61 trillion from January to July 2024, putting the government on track to meet its fiscal targets for the year.

As part of the recalibration of fiscal targets, Secretary Recto refined the DOF’s priority revenue measures pending in Congress to collect more resources without placing undue burdens on the people.

“For our goal is to maximize gains, minimize pain, and ensure fairness and fiscal consolidation. Because these challenging times demand that we have to protect our revenue base and collect what is already on the table,” he said.

The measures include the imposition of value-added tax on foreign digital service providers, the excise tax on single-use plastic bags, package 4 of the comprehensive tax reform program, rationalization of the mining fiscal regime, and the motor vehicle user’s charge.

Meanwhile, Secretary Recto shed light on the DOF’s move to heed Congress’ directives in collecting the excess and unused funds of GOCC to finance crucial government projects under the unprogrammed appropriations of the 2024 General Appropriations Act (GAA).

“It was a mandate we faithfully complied with based on the merit of our cost-benefit analysis and the legal railguards spelled out in legal opinions by the OGCC [Government Corporate Counsel], the GCG [Governance Commission for GOCCs]), and COA [Commission on Audit],” he explained.

He reiterated that the return of the excess and unused funds of PHP 89.9 billion from the Philippine Health Insurance Corporation (PhilHealth) and PHP 108.9 billion from the Philippine Deposit Insurance Corporation (PDIC) to the National Treasury was approved the GOCCs’ respective boards.

In the case of PhilHealth, Secretary Recto assured the FEF that not a single centavo of the excess funds came from member contributions because they are all government subsidies that the agency failed to spend.

“[T]he funds are all government subsidies — unused, excess, and dormant in PhilHealth while taxpayers pay interest on them without anyone benefitting,” he stressed.

Therefore, the move does not affect the viability of PhilHealth and does not impair the delivery of its services.

Despite this, PhilHealth retains around PHP 550 billion in its benefit chest fund, more than sufficient to cover multi-year claims and ensure uninterrupted operations for years to come.

“In fact, it has increased its benefit package by 30 percent across the board this year, in line with the President’s directives. And it will also continue to receive subsidies from the government,” Secretary Recto said.

He further noted that the excess funds will strictly be used for the projects in health, education, social services, and infrastructure as identified under the Unprogrammed Appropriations of the 2024 GAA, which are transparent and fully accessible to the public: https://www.dof.gov.ph/download/unprogrammed-appropriations-projects/?wpdmdl=45139&refresh=66a83553a57081722299731.

According to the DOF’s cost-benefit analysis, the projects to be funded by the Unprogrammed Appropriations will hike real [gross domestic product] GDP growth by 0.7%, increase an additional PHP 23-24.4 billion in revenues, and create hundreds of thousands of jobs.

But the Finance Chief warned that if the projects were to be funded with additional borrowings, it would increase the country’s deficit-to-GDP ratio from 5.6% to 6.4% in 2024, and also hike the debt-to-GDP ratio from 60.6% to 61.4% this year. This translates to an additional PHP 12.7 billion in interest payments every year.

“In effect, we will fail to hit our Medium-Term Fiscal Program and put at risk our hard-earned investment grade ratings, just when we have recently achieved a credit rating upgrade of A minus. It seems as if we took one step forward to our Road to A agenda only to take three steps back,” he said.

“Of all people, you know all too well that no responsible Finance Secretary would ever allow this to happen. In a very real sense, standing idly by as funds like these sleep on would be a complete disservice to the nation – both for our people today and the next generation,” Secretary Recto told members of the FEF.

Nevertheless, the Finance Chief clarified that he fully understands the plight of the medical community and believes that public health deserves the full support of the government.

“This is a position that I have maintained in my three decades in Congress. My track record speaks for itself,” he said.

With this, he encouraged members of the FEF to help shed unbiased light on the issue and stand with the government under the banner of fiscal prudence and truth.

“As the country’s economic freedom fighters, I call on you to continue fighting on the frontlines with us for the nation’s highest good,” the Finance Chief said.