THE administration should carefully weigh the cost of scrapping the decades-old travel tax against its advantages as it risks becoming counterproductive, an analyst said.
“The benefits to the economy are unclear,” Jose Enrique A. Africa, Executive Director of IBON Foundation told BusinessWorld in a separate Viber chat.
He explained that since Overseas Filipino Workers are already exempt and their dependents pay a reduced rate, the abolition would primarily benefit a small segment of the population.
“It’s reported that some P7 billion to P8 billion in revenue annually may even be lost — this is a tiny one-fifth of 1% of government revenues but, still, is a revenue stream that is mildly progressive,” he said.
“It may even be counterproductive if it incentivizes leisure travelers to spend abroad rather than domestically, and increases foreign exchange outflows,” he added.
He suggested prioritizing tax reforms that also reduce consumption taxes like Value-Added Tax that affect the poor, while ramping up wealth and income taxes on the rich and reducing incentives for foreign capital.
Meanwhile, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort told BusinessWorld said the proposal is meant to align Philippine travel standards with global best practices and reduce the burden on citizens.
“This could be beyond the revenues to be foregone by the national government, as the usual stance is the protect the recurring government revenue sources in view of budget deficits that require more borrowing/debt,” he said in a separate Viber message.
“This would reduce the steps and the lines for Filipinos traveling overseas for leisure/holidays or for business. This would lead to cost and time savings for some Filipinos traveling abroad.”
Currently, departing travelers are required to pay P2,700 for first class and P1,620 for economy-class tickets. To address concerns regarding the loss of funding for key sectors, the Palace said that programs currently supported by the tax — including those under the Tourism Infrastructure and Enterprise Zone Authority, the Commission on Higher Education, and the National Commission for Culture and the Arts — would instead be funded through the General Appropriations Act. At present, the tax revenue is split 50-40-10 among these three agencies, respectively. — Erika Mae P. Sinaking
