Tax Collection
Plug Those Leaking Ships

In the first half, the national government’s fiscal deficit was estimated at P37.7 billion, missing the government’s target by P6.4 billion. This is not surprising in view of reports that the Bureau of Internal Revenue and the Bureau of Customs had missed their revenue targets in January to May by P28.6 billion and P10.1 billion, respectively. The two bureaus’ collection performance has continued to worsen, with preliminary first-half figures showing that the BIR underperformed by an estimated P45.2 billion, while the BOC’s preliminary shortfall was estimated at P13 billion.

Unfortunately, the lateral attrition law’s implementing rules were still under discussion by a House oversight committee when the tax collection figures came out. Otherwise, heads would have rolled at underperforming revenue districts and overperforming units would have received corresponding rewards.

In June, BIR Commissioner Jose Mario Buñag had to take the axe for the below-target performance of the country’s main revenue collecting agency, although he left the agency proud that its performance for January to May had actually exceeded the previous year’s collections by 6.6%. Following Buñag’s relief and the reorganization of the agency’s Large Taxpayer’s Service, preliminary figures indicated the bureau’s collections decreased 22.8% in June to P36.9 billion from P47.8 billion a year ago,

For his part, BOC head Napoleon Morales denied he was quitting. He pledged, however, to make up for his agency’s first-semester undercollection in the second half, despite the impact of the strong peso on imports.

Since President Gloria Macapagal-Arroyo has declared that there will be no new taxes, the heat is on for the revenue agencies. The 2007 collection targets for the BIR and BOC are at P765.8 billion and P228.2 billion, respectively. To meet its target, the BIR has to turn around its poor performance with regard to excise taxes, the RVAT, and large taxpayers, as well as be more rigorous with tax audits. The BOC is intensifying port monitoring. Tax evaders and smugglers have to be aggressively pursued. The government’s fiscal managers are going to have to work double-time to plug the leaks in the hulls of the country’s revenue ships.

signals Despite the rise in costs associated with the start of another schoolyear, headline inflation went down to 2.3% in June from 2.4% in May. Core inflation likewise slowed down to 2.5% from 2.6%. Domestic liquidity growth slowed down to 21.1% in May from 26.3% in April. Growth in net foreign assets and net foreign domestic assets likewise decelerated to 32.6% and 6.4%, respectively, from 37.9% and 12.5%. Net foreign direct investments dipped 4.8% to US$44 million in January to April from US$48 million a year ago. Net reinvested earnings and net other capital shrunk 100.0% and 90.3%, respectively. Meanwhile, net equity capital increased 24.0%. The project cost of combined investments approved by the Board of Investments and the Philippine Economic Zone Authority rose 29.9% to P130.2 billion in the first half from P100.2 billion a year ago. Foreign direct investments expanded 48.0% to P64.9 billion from P43.8 billion, while Filipino investments grew 15.9% to P65.4 billion from P56.4 billion. The project cost of combined investments approved by the Clark Development Corporation and Subic Bay Metropolitan Authority shrunk 98.0% to P52.95 billion in the first quarter from P1.06 billion a year ago. Foreign direct investments contracted 99.4% to P300.4 million from P52.3 billion. On the other hand, Filipino investments grew 14.3% to P763.0 million from P667.6 million. Net foreign portfolio investments rose 228.8% to US$2.5 billion in the first half from US$773.8 million a year ago. Meanwhile, gross portfolio investments inflows grew 131.5% to US$7.8 billion from US$3.4 billion, due to increased confidence in the economy after the generally peaceful May polls. At the same time, gross portfolio investments outflows increased 102.4% to US$5.2 billion from US$2.6 billion due to profit taking on account of the strong peso. Merchandise exports rose 7.7% to US$20.4 billion in January to May from US$19.0 billion a year ago. While exports to the U.S. and Japan shrunk 2.2% and 13.3%, respectively, exports to Hong Kong, China, and Taiwan expanded 92.1%, 42.4%, and 36.6%, respectively.