Like many countries in Asia, the Philippines struggles with a low tax-to-GDP ratio. This is compounded by massive foregone revenues from illicit financial flows (with an estimated PHP500 billion or $8.99 billion lost per year according to one conservative estimate)1 and relies heavily on indirect taxation, with Value-Added Taxation accounting for 22% of the government’s revenue in 2021.2 As also in the case across the region, tax reforms enacted during the COVID-19 pandemic were characterized by revenue-eroding measures like reduced corporate taxation and expansion or increase of consumption taxes that directly hit the spending capacity of ordinary consumers.
At a time when when the direct impacts of the COVID-19 pandemic on peoples’ health and livelihoods were still at its peak, and funding for essential public services were most needed, many governments turned to more regressive tax policies and heavy borrowings. This served to increase pressures on domestic resource mobilization and tighten the country’s dependence on debt. Massive inequalities in Philippine society exposed and worsened by the pandemic remain unaddressed by public policy.
The Philippine government’s failure to address widening inequalities can be seen in the two interconnected areas of domestic resource mobilization and public services, specifically for the needs of the education sector. The crisis in education and other essential services exposed by the pandemic had already existed even before COVID-19 struck– they remain largely unaddressed, and will only worsen if urgent measures to correct flawed policies and systems are not put in place.