ECONOMIC managers warned that the upcoming 2028 national elections could pressure lawmakers to approve tax breaks and higher spending-a move that would weaken the government’s revenue base.
‘There is a strong likelihood that populist revenue-eroding and expansionary spending measures, which include tax breaks, tax exemptions or deductions, will be passed,’ said the Development Budget Coordination Committee (DBCC) in its latest fiscal risk statement.
The ‘piecemeal’ passage of the Department of Finance’s (DOF) proposed Progress Bill, specifically its income tax relief component, and the possible delay, non-passage or ‘watered-down’ version of the revenue-generating measures will further erode the tax base, the DBCC said.
The tax relief proposes to exempt wage earners with annual income of P350,000 and below and micro and small businesses from personal income tax and minimum corporate income tax. The tax relief, however, would result in an average revenue loss of P81.73 billion.
To make up for the foregone revenues, the DOF is pushing to expand excise and wealth taxes, which are expected to raise an average of P129.68 billion. These include higher tax rates on sweetened beverages, distilled alcohol, e-cigarettes and automobiles, as well as a proposed tax on plastic products.
Topping these risks is the protracted impact of the Middle East conflict, which could have an enduring effect on the broader economy and exert additional pressure to enact measures that could undermine the tax base, the DBCC said.
‘Disruptions in remittances also reduce economic activity, which may impact tax collection, particularly consumption taxes given that the country is a consumption-led economy,’ it added.
The government’s revenue projections for the medium term are expected to reach P4.81 trillion in 2026, P5.21 trillion in 2027, P5.52 trillion in 2028, P5.99 trillion in 2029 and reach P6.52 trillion in 2030.
The DBCC said this would be driven by the full implementation of tax policy reforms, alongside continued strengthening of tax administration, digitalization and enforcement.
At the same time, the government faces spending pressures from external shocks, as higher oil and food prices have increased the need for subsidies and social protection programs.
This comes against a backdrop of weaker economic growth prospects, with the DBCC’s growth assumptions trimmed by 1.5 percentage points (pp) for 2026, 0.5 pp for 2027 and 1 pp for 2028 to 2030.
The targets were revised to account for the adverse impact of geopolitical conflict as its local implications were ‘far-reaching,’ and the government’s responses to cushion the impact by providing subsidies and other forms of support.
‘The domestic economic growth outlook is fragile in 2026 due to a slowdown in public infrastructure spending, a spillover of the corruption scandal in 2025,’ the economic managers said. ‘This economic outlook is further exacerbated by heightened global uncertainty with the ongoing US/Israel-Iran conflict that began in February.’
Nevertheless, the DBCC expects the enactment and implementation of the DOF’s priority measures to strengthen government revenues and help the state’s coffers better withstand and respond to shocks brought about by global uncertainties.
These include the value-added tax on digital service providers, expected to raise P26.47 billion annually; the Capital Markets Efficiency Promotion Act, P4.90 billion; and the new Mining Fiscal Regime, P6.42 billion.