By Kenneth Christiane L. Basilio, Reporter
FINANCE Secretary Ralph G. Recto has withdrawn the Department of Finance’s (DoF) proposal to extend capital gains tax, donor’s tax and estate tax, citing higher revenue collections in the primary quarter.
At the identical time, Mr. Recto in an announcement on Tuesday said that the federal government shouldn’t be looking for to impose recent taxes or revenue measures amid the federal government’s “robust fiscal position.”
“The federal government is correctly managing its funds, ensuring that public needs are met without burdening the citizenry with recent taxes,” he said. “At the identical time, the DoF will proceed to explore and strengthen nontax revenue sources to fulfill the revenue targets.”
In a letter to House Ways and Means Committee Chairperson and Albay Rep. Jose Ma. Clemente S. Salceda, Mr. Recto said the DoF isn’t any longer pushing for the proposed amendments to the Capital Markets Efficiency Promotion Act (CMEPA) “which primarily sought to introduce measures that might secure our path to fiscal consolidation.”
“The Department respectfully requests to withdraw consideration thereof in view of the better-than-accepted revenue performance throughout the first quarter of the 12 months,” he said.
Mr. Salceda’s office provided a replica of the letter to the media.
The DoF had previously urged legislators to exchange the CMEPA with the Government Revenues Optimization through Wealth Tax Harmonization (GROWTH) bill.
Under its draft GROWTH bill, the DoF proposed to temporarily increase the rates of capital gains tax on real property, donor’s tax, and estate tax to 10% from 2025 to 2030. These rates might be reduced to six% starting 2031.
The DoF had estimated this might yield around P300 billion in revenues.
Within the letter to Mr. Salceda, Mr. Recto said the proposed tax hikes were only intended as a buffer for higher government spending during “times of crisis and to supply the federal government with fiscal space within the worst-case scenario.”
“With double-digit growth in tax collection, the federal government is well on course in meeting its fiscal consolidation goals,” Mr. Recto said.
In accordance with the DoF, total tax collections jumped by 13.55% to P931.5 billion in the primary three months of 2025, citing stronger tax administration and enforcement.
The Bureau of Internal Revenue’s (BIR) collections jumped by 16.67% to P690.4 billion as of end-March. Revenues generated by the Bureau of Customs (BoC) rose by 5.72% to P231.4 billion.
“This was primarily resulting from each revenue agencies’ continued success in strengthening tax administration, digitalization, and enforcement efforts,” the DoF said.
This 12 months, the federal government is projecting to gather P4.64 trillion in revenues. Of this, P3.23 trillion is predicted to come back from the BIR and around P1.1 trillion from Customs.
Mr. Recto said the National Government’s (NG) revenue levels are “greater than sufficient to support the expenditure requirements.”
The federal government can be managing its deficit and debt levels, he added.
The federal government’s deficit ceiling is capped at 5.3% of gross domestic product (GDP) this 12 months. It’s looking for to bring this down further to three.7% by 2028.
The International Monetary Fund earlier said that the Philippines has space to further enhance its tax efficiency, particularly in excise taxation, value-added tax and tax incentives.
Latest data from the DoF showed that the NG’s revenues as a share of GDP reached 16.72% in 2024, up from 15.73% in 2023.
Nonetheless, the DoF’s withdrawal of its proposed tax hikes is taken into account moot because the CMEPA was already ratified by Congress last February. The bill is about to be transmitted to Malacañang for the President’s signature.
“Raising these taxes could have risked discouraging property transactions, capital mobility, and intergenerational wealth transfers, that are crucial for sustaining domestic consumption and investment,” John Paolo R. Rivera, a senior research fellow on the Philippine Institute for Development Studies, said in a Viber message.
The federal government should rigorously evaluate which tax measures to implement, ensuring they don’t lead to revenue losses while maximizing potential gains for the state, Rizal Industrial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
Mr. Salceda said the federal government should pursue taxes on luxury goods if it desires to generate additional revenues.
“That may be a higher tax on the rich,” he said.
Nixing the proposed hike on capital gains tax was a disappointing move, because it might have been a “small step” towards taxing wealthy Filipinos, Jose Enrique “Sonny” A. Africa, executive director of think tank Ibon Foundation, said in a Viber message.
“Keeping the lower rates on capital gains, donor’s and estate taxes reinforces fiscal inequity to favor the rich,” he said. — with Luisa Maria Jacinta C. Jocson
