MANILA, Philippines (1st Update) - Philippine Senator Benigno "Noynoy" Aquino Jr. III, frontrunner in opinion polls ahead of a May national election, said on Thursday he would not impose new taxes or increase tax rates if elected president.

He told members of the Makati Business Club that he would pursue the rationalization of fiscal incentives given to investors as part of efforts to plug revenue leaks and lower the budget deficit.

"We will refrain from imposing new taxes or increasing tax rates," Aquino told the business forum. "I strongly believe that we can collect more taxes at the BIR (Bureau of Internal Revenue) and higher duties at customs if we become more serious in curbing and punishing tax evasion and smuggling."

In an attempt to court the business community's support, he stressed that lower taxes is part of his "vision  to transform our country." 

He noted that lower tax rates should be "enjoyed by all rather than have some enjoy absolute tax exemptions while we burden the rest of the economy with very high tax rates."

The top corporate tax rate is 30%. Other taxes include a value-added tax (VAT), a real property tax, and an inheritance tax. In the most recent year, overall tax revenue as a percentage of GDP was 14%. Despite domestic political pressure, authorities did not repeal the VAT on petroleum products during the recent economic slowdown.

Budget deficit

The next president will be assuming a government with a weak fiscal position. While the Arroyo administration hoped to eliminate the decades-long budget deficit by 2010, the global economic slowdown triggered in 2008 changed the government's fiscal hopes.

The country's budget deficit was expected to hit as much as P300 billion in 2009 due largely to low revenues.

Aside from the usual culprits--inefficient tax administration, widespread tax evasion and corruption--the government's poor revenue collection has also been blamed on slow economic activity, the passage of several revenue-eroding laws, and the negative impact of back-to-back typhoons that hit the country late last year.

"In addressing the looming fiscal crisis good governance and the drive against corruption are critical components in our strategy. We will refrain from imposing new taxes or increasing taxes,"

The revenue collecting agencies -- the Bureau of Internal Revenue (BIR) and Bureau of Customs (BoC)-- are tasked to collect P830 billion this 2010.

Both have already implemented reshuffling of their staff as part of efforts to be more efficient in meeting collection targets.

Poor tax collections has resulted in growing debt stock. As of September 2009, the government's total foreign and local debts inched up to P4.338 trillion.

Additional debts, which address current funding needs but could be paid in the future, translate to more debt burden for future generations.

Not popular

Raising taxes has cost the political careers of its advocates. In the 2007 elections, Ralph Recto lost his bid to return to the senate after pushing for the passage of the Expanded Value Added Tax (EVAT), which imposed higher levy on various items, including oil imports.

The EVAT, which was passed in 2005, allowed the government to dodge a looming fiscal crisis.

In August 2009, Sen. Francis "Chiz" Escudero, who was eyeing the presidency then, also tried to court the business community by saying that he will not impose new taxes if elected in 2010.

The government has been pushing for the passage of several tax measures, which include the restructuring of excise tax on sin products, rationalization of fiscal incentives, and the simplified net income taxation, among many others.

With only a few weeks before legislators wrap up the 14th Congress on February 5, these key tax measures are not expected to be passed. - With Reuters