Philippines - Rating Agencies Want Reformed Excise

MANILA, Philippines — Two international credit rating agencies are “very keen” on the Aquino administration’s push for the reform of the Philippines’ excise tax regime on alcohol and tobacco products, the Department of Finance (DOF) said Wednesday.

In a statement released from London, Finance Secretary Cesar V. Purisima said that should a planned increase in so-called “sin taxes” push through, this would boost the country’s chances of winning an investment grade rating.

“The ratings agencies are very keen on our push for reforms in the sin taxes. A World Bank study estimates that we could gain as much as 1.3 percent of [gross domestic product] in additional revenues from reforms in the sin taxes like uniform tax rates and indexation,” Purisima said.

Purisima a long with National Treasurer Roberto B. Tan met with representatives of Fitch Ratings and Moody’s Investors Service in London on Tuesday to discuss the Philippine economy’s strength and resiliency.

During the meeting, Purisima said the rating agencies took note of the government’s improving debt and revenue ratios achieved mainly through the Aquino administration’s efforts to enhance tax administration and were encouraged by the government's push for reforms in the sin taxes.

“Such an improvement in our tax base would definitely boost our drive towards investment grade,” Purisima pointed.

The finance chief also reiterated that Fitch and Moody’s have underrated the Philippines and it deserves a second-look on its credit rating.

“I met with them to continue our dialogue on the strength and resiliency of the Philippine economy, as well as to discuss our view that the Philippines continues to be underrated,” Purisima said.

Purisima explained that the market has already recognized the Philippines’ resilience and the strength of the country’s credit standing and was rating it as investment grade.

“In fact, our bond issuance in January marked the lowest USD coupon ever achieved by an Asian Sovereign for a bond with a tenor greater than 10-years,” he said.

Cigarette manufacturer PMFTC Incorporated, meanwhile, accused the finance department of obsessing over its credit ratings.

BM.com

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