MANILA, Jul 09, 2009 (Xinhua via COMTEX) -- The Philippine government should raise gasoline excise taxes to raise revenues, support its fiscal stimulus program and limit its widening budget deficit, the World Bank said.

"Increasing petroleum excises would produce immediate revenue gains and help ensure the fiscal stimulus remains controlled and expenditure-driven so as to maximize its effectiveness and targeting," the World Bank said in its quarterly economic update issued Thursday.

The Philippine import tariff on petroleum products is 3 percent, and is subject to a 12 percent value-added tax. Gasoline has an effective tax rate of about 25 percent of the retail price. The World Bank said petroleum products in the Philippines are "lightly taxed" as compared to other oil importing country.

Raising gasoline excise taxes will also ensure that the Philippine tax system is progressive as "petroleum products are disproportionately consumed by the richer citizens."

The World Bank added that this will produce side benefits like promoting human health as higher taxes on gasoline will discourage the use of private vehicles and reduce congestion and air pollution especially in the urban areas.

The World Bank noted that falling revenues and higher government spending, owing to the fiscal stimulus package, may hurt the economy as it can result to a large budget deficit.

"Failing to contain the projected fall in the tax effort could jeopardize the size of the planned expenditure increase, and/or generate large deficits," the World Bank said, adding that this will also limit the impact of the programmed fiscal stimulus package.

The Philippine government introduced a 330 billion pesos (about 6.8 billion U.S. dollars) Economic Resiliency Plan (ERP) to cushion the economy from the impact of the global crisis.

But such package came at a price, as it will widen the country' s fiscal deficit.

Philippine economic managers forecast that this year's budget deficit will not go beyond 250 billion pesos (about 5 billion U.S. dollars).

This is equivalent to 3.2 percent of the country's GDP and is one of the highest in recent years. Finance Secretary Margarito B. Teves assured that the Philippine Bureau of Internal Revenue (BIR) will be able to meet its revenue targets this year thanks to several programs that the BIR implemented.

This includes the padlocking of businesses of delinquent tax payers. The finance department has also urged the Congress to pass key revenue enhancing measures including the restructuring of the excise tax on tobacco and alcohol products (more popularly know as the "sin tax") and a simplified net income taxation scheme.

But the World Bank estimates that revenues may decline owing to a slowing economy, reduction on personal income tax and the weakening of the BIR's Large Taxpayers Service (LTS).

<<XINHUA NEWS AGENCY -- 07/10/2009>>