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Philippines seeks 'catastrophe' bond sale by end of this year

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The Philippines is working to complete the sale of as much of US$1 billion in bonds through the World Bank by the end of this year, Finance Secretary Cesar Purisima said.

[MANILA] The Philippines is working to complete the sale of as much of US$1 billion in bonds through the World Bank by the end of this year, Finance Secretary Cesar Purisima said.

The sale could serve as the basis for future issues as part of the nation's programme to mitigate the impact of climate change, Mr Purisima said in an interview at the International Monetary Fund's annual meeting, in Lima.

The Philippines has been slammed by successive deadly typhoons in recent years that wreaked havoc on both the nation's infrastructure and its finances. Super Typhoon Haiyan alone caused US$13 billion in damages in 2013, bringing the cost of weather-related events that year to US$24.5 billion, or 3.8 per cent of gross domestic product, Germanwatch estimates.

The government is also evaluating how to mobilise resources from economic activity to face up to climate change, including the so-called Tobin tax on financial transactions. The tax "has its pluses and minuses," and the government is not yet proposing its implementation, Mr Purisima said.

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Faced with calls to cut taxes, Mr Purisima said it is fair to discuss improving the tax structure to make it more competitive, equitable and progressive, though any action would be left to the next administration.

"The approach will have to be one that is holistic, that looks at tax rates and types of taxes as well as administrative tools and capacity to better implement tax laws," Mr Purisima said. "If it's done on that basis, I don't think it should affect the credit rating on the downward side; it should improve it, because the net impact will be to broaden the tax base, reduce tax evasion." Mr Purisima said part of a comprehensive approach could be to reduce tax exemptions and eliminate secrecy on bank accounts.

The Philippines achieved investment-grade credit ratings from Standard & Poor's and Moody's in 2013. The nation is "on the lookout" for market opportunities to issue bonds overseas to prefund its 2016 needs, Mr Purisima said.

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