Moody’s warns ProGRESS tax plan may delay Philippines fiscal repair
Moody’s Investors Service warned the Philippines’ proposed ProGRESS tax reforms risk widening the budget deficit and pushing back the government’s debt-reduction timetable.
Source: BusinessWorld Philippines · August 20, 2026 at 6:31 PM · AI-assisted report
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KUALA LUMPUR, 21 AUGUST 2026 —
Moody’s Investors Service warned the Philippines’ proposed ProGRESS tax reforms risk widening the budget deficit and pushing back the government’s debt-reduction timetable.
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The proposed bill would lift the personal income tax exemption to P350,000 from P250,000, cutting revenue by an estimated P81.73 billion a year, according to the Department of Finance. To offset the loss, the bill adds new or higher excise duties on sweetened drinks, tobacco, alcohol, plastics and a 15% minimum tax on large multinationals, Moody’s said.
“The government’s proposed ProGRESS package would raise the personal income tax exemption threshold and ease the burden on micro and small enterprises, offset by higher excises on sweetened beverages, tobacco and alcohol, a new plastics levy, and a 15% minimum tax on large multinationals,” Moody’s Assistant Vice-President for Ratings Young Kim told BusinessWorld in an emailed response.
He cautioned that the net revenue gain could be smaller than expected and the package still needs Congress approval, creating extra uncertainty.
The Department of Finance projects the tax package would generate an average P129.68 billion a year from 2027 to 2030, but Moody’s says that still leaves room for net revenue erosion if the relief measures pass without full offsets.
The government set a Medium-Term Fiscal Framework in mid-2022 that aimed to lower the debt-to-GDP ratio to 51.1% and the fiscal deficit to 3% of GDP by 2028. Those targets are already under strain, Kim said.
“The tax relief measures — if enacted without offsetting revenue measures, though it is still too early to assess the full fiscal impact — would erode revenue and further delay the government’s fiscal consolidation,” he said.
Philippine GDP grew just 2.3% in the second quarter, the slowest pace outside the pandemic since the fourth quarter of 2009. The debt-to-GDP ratio reached 66% in June, the highest in more than 20 years.
The national debt climbed to P19.07 trillion at end-June, up 2.8% from May and 10.41% year on year. The 2027 Budget of Expenditures and Sources of Financing forecasts debt will rise to P19.77 trillion by year-end and to P21.48 trillion in 2025.
Moody’s says the Philippines’ fiscal consolidation hinges on whether the government can find offsetting revenue and improve collection efficiency.
Kim added that the near-term 2026 measures appear broadly revenue-neutral because spending is being reprioritised, but the key risk remains credibility of the medium-term debt-reduction path.
About 40 ProGRESS-related bills have been filed in the House of Representatives, with only two clearing committee stage, and seven in the Senate, leaving the reform’s passage uncertain.