MANILA - Faced with a rising budget deficit, the Finance department yesterday called on Congress to pass a measure that would temper the legislation of incentives and promote prudent government spending.

Finance Undersecretary Gil S. Beltran told a congressional oversight committee that the passage of a "fiscal responsibility bill" was necessary given the approval of measures that have led to the state’s losing revenues.

"This (fiscal responsibility bill) scheme would instill fiscal discipline across all areas of the government ... We hope that Congress can get to work on this," Mr. Beltran said, adding that a proposal had been drafted.

"We are planning to initiate this proposal in the House [of Representatives]. We already have a draft of the bill which would still be subject to changes as we have yet to discuss this with the would-be sponsor," he said.

Among the basic provisions of the proposal are:

• restraining Congress from passing too many tax cuts by requiring it to also approve measures that will offset foregone revenues;
• forcing state agencies to keep watch over their finances by withdrawing incentives if they overspend;
• promoting efficiency in budgeting by requiring the Finance department to spend within the debt ratio set; and
• requiring state-run corporations to explain to Congress and to the public when they incur high income losses.

Mr. Beltran reiterated the need to raise revenues as the government could not afford to reduce its spending during the economic slowdown.

"We are not looking at lowering our spending but we will try our best not to exceed the target deficit," he said.

House Ways and Means Committee Vice Chairman and Camarines Norte Rep. Liwayway P. Vinzons-Chato (2nd district) said she was open to sponsoring the measure.

"As former BIR (Bureau of Internal Revenue) commissioner, I understand the Finance department’s efforts to cover every angle towards ensuring that we have a healthy fiscal system. I will meet with the department so that we can come out with a final draft that I can file," she said in an interview.

Mr. Beltran said similar bills had been filed since 1998 but were bypassed by lawmakers.

Expectations of lower revenues have prompted the government to widen this year’s fiscal deficit to P250 billion from P199.2 billion previously.

Finance officials have warned that too many incentives would raise interest rates, increase borrowing costs and deprive the government of much-needed revenues.

Finance department estimates showed that losses from "negative measures" — bills and recently enacted laws that result in foregone revenues — amount to P71.1 billion, more than the P50.9 billion expected from by "positive measures."

Congress has so far approved four "negative measures" — the Personal Equity Retirement Account bill (foregone revenues of P7 billion per year), National Tourism Act (P3 billion), reduction of the corporate income tax rate to 30% from 35% starting this year (P20 billion), and an individual income tax relief law (P26.3 billion).

Another "negative measure" is a bill scrapping the documentary stamp tax (DST) on stock market transactions, which was ratified by the House of Representatives last month and is projected to cause revenue losses of P1.4 billion a year.

The House has also approved bills scrapping the 5% premium tax on life insurance (P1.8 billion) and removing the 0.25% DST on life insurance (P0.8 billion).

The ways and means committee, meanwhile, is discussing the conversion of the 12% value-added tax (VAT) on power distributors to a 3% franchise tax (estimated annual loss of P7.1 billion), removal of the 0.15% DST on overseas Filipino workers’ remittances (P1 billion), and the elimination of the 20% excise tax (P1.7 billion) and VAT (P1 billion) on hybrid vehicles.

The Finance department has been asking Congress to pass the following "positive measures": the restructuring of tobacco and alcohol excise taxes (expected to generate P20 billion a year), rationalization of fiscal incentives (P10 billion), and simplified net income taxation (P5.2 billion). It has also backed measures seeking to meter telco revenue streams (P5.7 billion) and a bill imposing harsher penalties against smugglers (P10 billion).

The 14th Congress ended its second regular session last June 5 and will open its third and final session on July 27.