MANILA, Philippines – The government must complement public-private partnership (PPP) mechanism with fiscal reforms like rationalizing fiscal incentives and fiscal responsibility bills, according to a non-governmental organization said.

“While PPP Public-Private Partnerships (PPP) is a scheme that can address infrastructure needs, the government cannot rely on it alone. It is also crucial to pass bills that will help enhance the government’s fiscal standing,” said Code: RED (Reforms for Economic Development) in a statement.

The budget deficit is expected to balloon further at P325 billion, which is 3.9 percent of the GDP. As of July, the deficit stood at P229.4 billion.

To date, the government has lined up rationalizing fiscal incentives and fiscal responsibility bills as among the fiscal reforms that the Aquino government is considering.

The rationalization of fiscal incentives should: a) focus on the grant of tax incentives to exports, strategic projects and domestic investments in the 30 poorest provinces; b) replace redundant instruments with performance-based types of tax incentives, e.g., accelerated depreciation, and longer carry over of losses, double deduction of training/research and development; c) make the VAT relief for exporters efficient and equitable; and d) apply uniformly the new fiscal incentive package to all prospective investments.

The fiscal responsibility bill will instill fiscal discipline in the public sector by: a) reducing the nondiscretionary portions of the budget, e.g., personal services and interest payments, to channel more resources to growth-inducing capital investments; b) granting or broadening of tax breaks conditioned on the imposition of countervailing mechanisms through revenue generation programs; and c) repealing of automatic guarantees by Government Owned and Controlled Corporations (GOCCs) and disclosure of contingent liabilities.

Meanwhile, the NGO said the PPP scheme can attract private capital that can help the government augment its limited resources and deliver critical infrastructure projects.