January–July infrastructure spending below target

22 August 2007 – According to the Department of Budget and Management, the government disbursed P653.6 billion for infrastructure and other public services in January to July. This is P43.7 billion below the programmed spending of P697.3 billion, a target that was set to support the goals of the Arroyo administration’s super regions and “social payback” programs.

The government spent P109.4 billion for capital outlays in January to July. Infrastructure spending , a component of capital outlay, grew 67% year-on-year to P82.2 billion from P49.1 billion. However, this is also P7.4 billion less than the programmed disbursement for infrastructure.

Budget Secretary Rolando Andaya said that the lower-than-programmed spending was due to the delay in the utilization of notices of cash allocation by agencies.
He pointed out that “improved revenue performance” had mobilized funds needed to support critical infrastructure projects in the countryside.

Government posts another fiscal surplus in July

17 August 2007 – After posting a surplus of P0.8 billion in June, the national government earned another fiscal surplus of P1.6 billion in July. The July performance is a significant turnaround from the fiscal shortfall of P17.0 billion a year ago. In January to July, the fiscal deficit shrunk to P39.4 billion, down 18.8% from P48.5 billion in the same period last year and also lower than the P41.0 billion recorded in the first half of 2007. The fiscal gap as of July is 62.5% of the end-2007 ceiling of P63.0 billion.

For the first time, both the Bureau of Internal Revenue and Bureau of Customs met their monthly revenue collection targets in July. Preliminary reports indicate that BIR and Customs collections exceeded their July target by P2.0 billion and P1.2 billion, respectively.

BIR collections rose 20.1% to P58.7 billion from P48.9 billion a year ago. Under BIR Commissioner Lilian Hefti, the agency’s large taxpayer’s unit and 19 revenue regions exceeded their programmed collections. Aside from pursuing unpaid taxes from large companies amounting to P5 billion, the BIR has been conducting an audit of the income tax holiday claims of companies registered under the Board of Investments and the Philippine Economic Authority. Looking forward, two programs, the Revenue Watch Dashboard and the LGU Revenue Assurance System, as well as the implementation of the new tax amnesty law, are expected to beef up the BIR’s collection performance in the following months.

For its part, the Bureau of Customs’ collections increased 27.4% to P20.28 billion from P16.4 billion a year ago. Nine of the bureau’s 15 ports surpassed their July targets. A recent related development was the stepping up of anti-smuggling efforts directly under the Office of the President.

In January to July, BIR collections expanded 7.1% to P393.4 billion from P367.3 billion a year ago, but fell short of its P431.1 billion year-to-date target by P37.7 billion. Customs collections grew 1.8% to P113.0 billion from P111.1 billion, but also fell below its P125.2 billion year-to-date target by P12.2 billion.

Out of the P19.1 billion in nontax revenues from privatization in July, P17.1 billion came from the sale of the government’s 20% stake in the Philippine National Oil Company–Energy Development Corporation. In January to July, the government raised P45.1 billion in revenues from privatization, up from P425 million a year ago. Over the next few months, the government expects proceeds from the sale of its shares in PNOC-EDC, San Miguel, and Meralco, as well as the sale of the old Iloilo airport, to boost nontax revenues, offset the shortfalls in the two bureaus’ collections, and even bring down the yearend deficit below P63.0 billion.

Meanwhile, as of this writing, the Bureau of the Treasury has not yet released the full details of disbursements in January to July.

Public-sector finances now
out of the red

24 April 2007 – Public-sector finances are in good shape again after being in the red for ten straight years. The consolidated financial position of the public sector turned in a surplus of P5.3 billion in end-2006—equivalent to 0.1% of GDP—from a deficit of P103.5 billion in end-2005. Government planners originally expected combined public-sector finances to incur a shortfall of P128.1 billion.

As revised, the national government posted a fiscal deficit of P64.8 billion in 2006, way below the P124.9 billion ceiling and the P149.8 billion shortfall incurred in 2005. Local government units are also in better fiscal shape since their surplus rose to P24.2 billion from P24.0 billion in 2005. Government financial institutions likewise posted a higher surplus of P8.0 billion from P6.6 billion, while social security agencies performed better as well with a surplus of P57.2 billion, up from P48.9 billion. Monitored government corporations also improved, with a lower deficit of P2.0 billion from P25.4 billion. Meanwhile, the Bangko Sentral posted a surplus of P557 million, down from P3.6 billion a year ago.

P52.0B fiscal shortfall recorded in Q1

23 April 2007 – The national government posted a fiscal shortfall of P52.0 billion in the first quarter, narrower than the P67.6 billion deficit incurred a year ago but higher than the P45.8 billion ceiling programmed for the period.

Revenues rose 15.8% in the first three months to P237.3 billion from P205.0 billion a year ago, but fell short of the P255.8 billion target largely due to below-target collections by the Bureaus of Internal Revenue and Customs amounting to P18.8 billion. On the other hand, public spending expanded 5.6% to P287.9 billion from P272.6 billion a year ago, but remained below the P301.6 billion programmed expenditure. The government saved P5.1 billion in interest payments but disbursed P4.6 billion above program in terms of allocation to local government units.

Meanwhile, the primary surplus, which is revenues less expenditures net of interest payments, grew 6.4% to P38.5 billion from P36.9 billion.

Outstanding national government debt rises to P3.9B in January

16 April 2007 – The level of outstanding national government debt rose 0.5% to P3.87 trillion January from P3.96 trillion in December 2006. According to the Bureau of the Treasury, the government completed its commercial borrowing requirement for 2007 amounting to US$1 billion in 25-year global bonds.

Outstanding domestic debt dropped 0.6% to P2.14 trillion from P2.15 trillion because of net redemption. On the other hand, outstanding foreign debt increased 1.9% to P1.73 trillion from P1.70 trillion as net availments outpaced the impact of the appreciation of third currencies as well as the peso against the U.S. dollar.

Interest rate bellwether drops
to new record low

2 April 2007 – The interest rate bellwether has dropped to a record low of 2.86%. Just a month ago, the 91-day T-bill rate had hit the previous historic low of 2.885%. The government raised its auction of 91-day T-bills to P700 million from an offer of P500 million.

While banks swamped the shortest tenor T-bills, demand for one-year T-bills dipped. Lower interest rates, coupled with a strong peso, saved the government close to P10 billion in interest rate payments in the first two months of 2007.

In late March, the Bureau of Treasury wanted to drop the issuance of shorter-term Treasury bills by 2008 in favor of Treasury bonds. Now, the Bureau of Treasury has rejected higher yields asked by banks for 364-day T-bills.

Fiscal deficit down to P62.2B in 2006

1 February 2007 – The national government’s fiscal deficit has narrowed for the fourth straight year, falling to P62.2 billion in 2006, way below the P125 billion original target and the P80 billion official estimate. As a ratio to GDP, the fiscal shortfall dipped to 1.0% from 2.7% in 2005. Although the impressive fiscal performance was achieved under a re-enacted budget, the country expects upgrades in outlooks and ratings from foreign credit rating agencies.

On track to achieving a balanced budget by 2008, the national government expects to keep the deficit down to P63.0 billion in 2007, despite greater spending for infrastructure, thanks to higher revenues from the RVAT and privatization measures.

National government revenues reached P978.7 billion in 2006, up 19.9% from P816.2 billion in 2005 and 4.6% higher than the P974.1 billion target. Revenues raised by the Bureau of Customs, Bureau of the Treasury, and other offices rose above targets to P198.2 billion, P73.9 billion, and 54.8 billion, respectively, from P154.6 billion, P70.6 billion, and P48.3 billion, also respectively. However, the Bureau of Internal Revenue, which collects two-thirds of all revenues, raised only P651.9 billion, 23.4% short of its P675.4 billion target, but higher over a year ago by P109.2 billion. The BOC easily met its target because of increased fuel imports. On the other hand, the BIR fell short of its goal due to lower tax collection on interest income arising from lower interest rates and the lower volume of government securities offered.

Meanwhile, public spending rose to P1.04 trillion, below the P1.1 trillion ceiling, but above last year’s P962.9 billion. Local government units received P174.7 billion from the national government, when its programmed ceiling was only P134.1 billion. Interest payments on government debt amounted to P310.1 billion only, below the P340.0 billion program, due to lower domestic interest rates and a strong peso-dollar rate.

Excluding interest payments from expenses, the national government enjoyed a wider primary surplus of P247.9 billion in 2006 compared to the year-ago level of P153.0 billion.

Congress ratifies 2007 national
budget bill

29 January 2007 – The Senate and the House of Representatives ratified separately the bicameral conference version of the P1.126 trillion 2007 General Appropriations Bill, breaking two straight years of re-enacted budgets. Of the P1.126 trillion amount, some P635 million are new appropriations. The new budget is expected to support the government’s GDP growth target of 6.1%–6.7% for 2007.

Last month, the bicameral conference committee broke the deadlock over the proposed P4.7 billion school feeding program, which was viewed by senators as election-related spending. In its place, the panel set aside P2.613 billion to provide malnourished public-school students with coco pan de sal, milk, and vegetable-based noodles instead of rice. The committee likewise gave the Department of Education an additional P2 billion for its schoolbuilding program.

The new budget also includes a P10 billion calamity fund to rehabilitate areas hit by typhoons last year, P873 million for new teachers, and P65 million for scholarship grants. The budget department also set aside P10.3 billion for the 10% salary hike of government workers starting July.

The national government expects to shell out P318.2 billion in interest payments on its debts this year, instead of P328.7 billion as originally programmed. The finance department, however, has a lower estimate of P301.6 billion in interest payments from an estimated P309.2 billion last year.

Overall fiscal deficit widens

17 October 2006 – Owing to a P16.2 billion fiscal shortfall in September, the national government’s overall fiscal deficit expanded to P50.4 billion in the first nine months from P34.2 billion in the first eight months. Nevertheless, the fiscal gap remains narrower than the P122.0 billion target for the period and the P108.5 billion deficit posted a year ago.

The Bureau of Internal Revenue continued to post an undercollection by P11.6 billion in the first nine months. Moreover, the revenue performances of the Bureau of Customs and Bureau of the Treasury also turned sour, with both agencies falling short of their September targets by P1.8 billion and P300 million, respectively. The BOC’s operations may have been disrupted after Typhoon Milenyo passed through Calabarzon and Metro Manila last month. In the first eight months, the BOC and BTr had overperformed against program levels by P7.3 billion and P12.1 billion, respectively. Collections from other revenue sources, however, surpassed the target by P3.4 billion, resulting in overall revenues of P715.9 billion in the first three quarters, P9.1 billion above target and P117.1 billion more than the revenue performance a year ago.

While the overall public spending of P766.3 billion in the first nine months was P62.5 billion below the programmed level, the P89.9 billion expenditures for September actually exceeded the target for the month by around P600 million. The national government also saved some P17.2 billion in interest payments for the same period. Allocations to local government units rose above target by P17 billion. Even with the infusion of P14.8 billion in internal revenue allotment to LGUs from the P46.4 billion supplemental budget enacted as RA 9358 today, the government expects a fiscal deficit below the P125 billion ceiling by yearend, which could result in sovereign credit rating upgrades from agencies abroad.

On the other hand, the primary surplus reached P204.1 billion, way above the P149.7 billion target.

Government loses “mother of all tax cases”

6 October 2006 – The Bureau of Internal Revenue today lost a 13-year old P25.6 billion tax evasion case against 55 executives of Fortune Tobacco Corporation, led by business taipan Lucio Tan, and against nine other corporations.

The case stemmed from the accusation that Fortune Tobacco had sold cigarettes to the nine companies at lower prices and understated its sales so that it could avoid paying higher taxes. Marikina Metropolitan Trial Court Judge Alex Ruiz ruled that the prosecution had failed to prove beyond reasonable doubt that Fortune Tobacco owned a single share of stock in the nine companies that bought the cigarettes for marketing and distribution. The court also said that some of the circumstantial evidence presented by the prosecution was “absurd” and that the common audit firm and interlocking directorates of some of these firms do not constitute an “unbroken chain of guilt.”

Townsman Commercial, Landmark Sales and Marketing, Crimson Croker Distributors, Dagupan Combined Commodities, First Union Trading Corp., Carl & Sons Inc., Omar Distributors, Oriel & Co., and Mt. Matutum Marketing Corp. were incorporated by former employees of Fortune Tobacco. These firms and Fortune Tobacco allegedly owe the government some P25.6 billion in value-added taxes and ad valorem taxes from 1990 to 1992. Claiming to have truckloads of evidence, the BIR filed the case in 1993 under Commissioner Liwayway Vinzons-Chato.

At present, the BIR is studying whether or not to appeal the decision. The defense believes any further legal moves will be prohibited because of double jeopardy. The Supreme Court ordered a retrial after the Marikina Metropolitan Trial Court dismissed the same case in 1999.

August surplus cuts overall fiscal deficit to P34.2 billion

18 September 2006 – On the back of improved revenue performance and restrained spending, the national government enjoyed a fiscal surplus in August. The fiscal surplus surged 718.6% last month to P14.3 billion from P1.8 billion a year ago.

The surplus cut the overall deficit to P34.2 billion in the first eight months from P48.5 billion in the first seven months and from P80.8 billion in the first eight months last year. The primary surplus increased 52.5% to P45.0 billion from P29.5 billion a year ago.

Revenues expanded 19.6% in August to P642.2 billion from P536.9 billion a year ago, with the Bureau of Internal Revenue surpassing its collection target last month by P1.9 billion. In the first eight months, the BIR fell short of its collection target by P6.1 billion, while the Bureau of Customs and the Bureau of Treasury overperformed by P7.3 billion and P12.2 billion, respectively.

At the same time, public spending increased by 9.5% only to P676.4 billion from P617.8 billion since the government has been operating on last year’s budget appropriation levels.

22.5% of RVAT revenue spent on social services and infrastructure

28 August 2006 – P8.6 billion of the P38.2 billion additional revenue yield from the reformed value-added tax in the first half was spent on social services (P6.9 billion) and on infrastructure (P1.7 billion).

Specific projects and programs include school feeding programs, P1.5 billion; health insurance subsidies for indigent families, P1.0 billion; the extension of LRT Line 1 to Cavite, P500 million; training programs for teachers and school administrators, P497 million; new textbooks and instructional materials, P490 million; school buildings, P252 million; and rural electrification, P240 million.

Finance Secretary Gary Teves says additional revenues from the RVAT will help finance President Gloria Macapagal-Arroyo’s P369 billion infrastructure program.

Debt service payments to shrink
in 2007

22 August 2006 – The budget allocation for debt service will be cut to 30% of the proposed P1.126 trillion national budget for 2007 from 33.1% in 2006. The cut is attributed to lower debt interest payments and to improved revenue collection, which is expected to reach P1.1 trillion next year from P974.2 billion this year.

Social and economic services will gain from the lower debt payments. The budget share of social services will go up to 29.6% (P332.9 billion) from 28.2% (P296.6 billion). The allocation for economic services will also rise to 19.8% of the budget (P296.6 billion) from 18.7% (P196.9 billion).

Among the agencies, the proposed budget for the Department of Education is the highest at P134.7 billion, up from P119.1 billion this year, partly to address shortages in classrooms and textbooks. Next is the Department of Public Works and Highways, which will have a budget of P73.6 billion, up from this year’s P62.3 billion, partly to build 1,024 kilometers of roads and bridges.

The budget for the Commission on Elections in 2007 will also increase to P9.8 billion from P3.3 billion to fund the national and local elections as well as the synchronized barangay and Sangguniang Kabataan elections.

Fitch upgrades RP country ceiling

17 August 2006 – Fitch Ratings has upgraded its country ceiling for the Philippines to “BB+” from “BB” along with upward revisions in the country ceilings of 39 other countries.

A country ceiling is not a rating but an important analytical input and constraint on the foreign currency ratings of entities and transactions originating in the sovereign’s jurisdiction. According to the foreign credit ratings agency, corporations, financial institutions, and structured transactions can only be rated above the sovereign currency issuer rating and up to the country ceiling if their stand-alone credit quality is considered sufficiently strong to withstand a sovereign debt crisis.

The upward revision of country ceilings reflects greater liberalization and capital exchange controls in many emerging market economies, the strengthening of monetary and exchange rate regimes, and the deepening integration of emerging markets in the global economy.

Fiscal gap narrows to P48.5 billion in first 7 months

17 August 2006 – The Bureau of the Treasury reported a fiscal deficit of P17.0 billion in July after three consecutive months of gaining fiscal surpluses. Nevertheless, in the first seven months, the government has cut the fiscal shortfall to P48.5 billion, down from P82.6 billion a year ago and way below the P125.0 billion deficit ceiling for the year.

The government’s fiscal position reflects improved revenue performance and “restrained” spending on account of the re-enacted budget this year. In January to July, overall revenues increased 19.7% to P544.7 billion from P455.2 billion a year ago, while spending rose just 10.3% to P593.2 billion from P537.8 billion. Bureau of Internal Revenue and Bureau of Customs collections went up 21.7% and 34.1%, respectively, to P367.3 billion and P111.1 billion from P301.9 billion and P82.9 billion a year ago. On the other hand, interest payments grew 9.5% to P190.7 billion from P174.3 billion. The primary surplus likewise expanded 55.1% to P142.2 billion from P91.7 billion.

SONA infrastructure projects
now cost P372B

1 August 2006 – The cost of infrastructure projects outlined by President Gloria Macapagal-Arroyo in her State of the Nation Address last 24 July is now estimated at P372.0 billion, up from the previous estimate of P270.0 billion.

Budget and Management Secretary Rolando Andaya said that P186.3 billion will be funded by the national government, P116.0 billion by government-owned and -controlled corporations, P68.4 billion through build-operate-transfer schemes or by the private sector, and P1.3 billion by local government units. Funds for the big-ticket projects will come from taxes, multilateral and bilateral institutions, and government-run banks.

Of the 92 SONA projects, rail projects will costs P180.2 billion; road projects, P101.8 billion; 23 airport projects, P43.1 billion; seaports, P15.8 billion; irrigation, P12.6 billion; and bridges, P5.0 billion.

For 2007, total investment costs for the infrastructure projects will reach P28.9 billion.

Palace submits P46B supplemental budget to Congress

27 July 2006 – Malacañang is seeking congressional approval of a P46.4 billion supplemental budget for 2006 before 24 August. The Palace submitted the proposed standby measure after Congress failed to break its stalemate on the P1.05 trillion proposed budget for 2006 at the bicameral conference committee level before it adjourned last May. So far, the government is operating under a reenacted budget of P906 billion.

Budget Secretary Rolando Andaya Jr. said the “non-postponable” spending in the proposed supplemental budget includes P4.6 billion for the Comprehensive Agrarian Reform Program; P8.6 billion for the salaries of 20,000 newly hired public-school teachers, the provision of English textbooks, grants under the Schools First Initiative Program, and the construction and repair of libraries; P539 million for providing food to 220,000 day care children; a P3.2 billion subsidy to the Metro Rail Transit; P6.1 billion for the Government Service Insurance System, Employees Compensation Commission, Home Development Mutual Fund, and PhilHealth; P4.9 billion for the pensions of retirees, war veterans, and uniformed personnel; P1.6 billion for modernizing the 2007 elections; P15.7 billion for local government units; P1.4 billion for the salaries of jail guards, firemen, and cadets, and the benefits of disabled policemen.

Fiscal authorities are confident of collecting additional revenues from the reformed value-added tax and on excise taxes on “sin products” this year.

Government posts third fiscal
surplus in June

17 July 2006 – The Bureau of the Treasury reported a P12.7 billion fiscal surplus in June, the third monthly surplus for 2006. In the first half, the government incurred a narrower shortfall of P31.5 billion, compared to the P90.4 billion programmed ceiling and the P67.5 billion deficit a year ago.

Revenue collections topped the P456.0 billion target and grew 21.1% to P471.1 billion from P389.0 billion a year ago. While the Bureau of Internal Revenue missed its revenue target by P2.8 billion, collecting only P318.4 billion, the Bureau of Customs overperformed by P5.1 billion, posting a collection of P94.8 billion. A year ago, the BIR and BOC revenues amounted to P260.9 billion and 72.2 billion, respectively. Meanwhile, the Bureau of the Treasury exceeded its target and year-ago performance by P11.9 billion and P0.6 billion, respectively, raising P36.5 billion.

With a re-enacted budget this year, government spent P502.6 billion in the first half, below program by P43.8 billion, but above last year’s disbursements by P46.1 billion. Some P11.2 billion of the unspent amount are savings from lower interest payments for government debts on account of lower interest rates. Meanwhile, Finance Secretary Margarito Teves committed to a balanced budget by 2008 without sacrificing spending on infrastructure and basic social services. The government plans to ask Congress to pass a supplemental budget this year.

Customs to top June collection target

22 June 2006 – The Bureau of Customs continues to surpass its monthly collection targets. It was already ahead of its June goal of P18.2 billion by at least P1.0 billion in the first two weeks of the month. For January to May, the agency also collected P4.5 billion more revenues than its P71.7 billion target. The BOC's fighting target by yearend is to raise P200.0 billion, slightly above its programmed revenue of P197.0 billion.

BIR sets measures to reach 2006 target

20 June 2006 – After failing to meet its P78.6 billion April revenue collection target by P7.2 billion and its P62.2 billion May target by P0.5 billion, the Bureau of Internal Revenue expects to exceed its P46.0 billion June target by P334.0 million.

This month, the agency expects to collect P35.8 billion from voluntary compliance, P7.4 billion from special efforts and initiatives, P2.1 billion from the reformed VAT, P0.8 billion from enforcement activities, and P0.2 billion from delinquent accounts.

In the first quarter, the BIR collected P135.0 billion, P3.6 billion above the P131.4 billion target. In the first five months, however, BIR collections fell P4.2 billion below its P268.0 billion target.

Pressed to meet its P675.4 billion collection target for 2006 set by the Department of Finance, the revenue agency has identified administrative measures that can boost tax collections by P5.7 billion from July to December. Additional revenues are expected from the agency’s industry benchmarking program (P1.9 billion), rigid surveillance and inventory-taking of low compliant taxpayers (P1.2 billion), Reconciliation of Listing for Enforcement or RELIEF program (P1.0 billion), “Premyo sa Resibo” promotion (P700 million), Oplan Accounts Receivable or AREC program (P500 million), and No Operation Return project (P400 million).

RVAT collections surpass target
in first 4 months

16 June 2006 – The Department of Finance reports additional revenue collections under the Reformed VAT Law reached P23.7 billion in January to April, P6.6 billion higher than the P17.1 billion target for the same period and also on track with the yearend goal of P75.0 billion.

The Bureau of Internal Revenue’s additional RVAT collections amounted to P8.3 billion, P6.1 billion above the P2.2 billion target for the period. Likewise, the Bureau of Customs’ RVAT collections reached P15.4 billion, P574 million higher than its P14.8 billion target.

Overall, the BIR’s VAT collection in the first four months reached P43.2 billion, P2.9 billion over its P40.3 billion target because of lower input VAT claims. The BOC collected P34.5 billion, exceeding its P32.4 billion target by P2.1 billion on account of higher prices and volume of imported oil.

DOF plans to hike Customs’ collection target for 2007

29 May 2006 – The Department of Finance plans to raise its programmed revenue collections for 2007 by P10.8 billion to P1.124 trillion from P1.113 trillion to step up the tax effort to 17.0% of GDP from 15.7% as originally targetted. The overall revenue target for 2006 is P975.6 billion.

The Bureau of Customs’ target may be increased to P231.1 billion next year from its P197.0 billion goal this year. Meanwhile, the Bureau of Internal Revenue is expected to collect P793.3 billion in revenues in 2007 from P675.4 billion in 2006. The government aims to narrow the fiscal gap to P63.0 billion in 2007 from P125.0 billion in 2006.

Government debt service
breaches Q1 target

5 May 2006 – According to the Department of Finance and the Bureau of the Treasury, the government exceeded its programmed spending for debt service in the first quarter, disbursing P279.4 billion, 64.1% above the P170.2 billion ceiling for the period.

Almost 63% or P175.5 billion were principal payments, while over 37% were in interest payments. Meanwhile, almost 78% or P217.1 billion were domestic debt payments, while over 22% or P62.3 billion were foreign debt payments.

Fiscal authorities point to the government’s healthy cash position, enabling it to prepay debts that have yet to mature. The government frontloaded interest payments from a bond exchange in the first quarter. Some debts were paid off from the proceeds of the US$2.2 billion worth of dollar- and euro-denominated bonds last January.

The outstanding debt of the government reached nearly P4.0 trillion as of end-January.

DOF nixes tax exemption hike on workers’ bonuses and benefits

3 May 2006 – The Department of Finance estimates that the government stands to lose P5–7 billion in tax collections a year if the threshold for income tax exemptions on workers’ bonuses and benefits is raised to P45,000 from the present P30,000, as proposed by the Department of Labor and Employment. The DOLE based its proposal on the 45.8% inflation rate from 1997 up to the present.

However, the DOF continues to support the proposed measure at the House of Representatives to exempt minimum-wage earners from the income tax. The department estimates a revenue loss of only P600 million a year if this bill is passed into law. The measure is expected to cushion the impact of the reformed value-added tax on consumers.

Customs beats collection target
in first 4 months

2 May 2006 – The Bureau of Customs surpassed its revenue target in April, the fourth straight month it has exceeded its target. According to preliminary data, BOC collections reached P58.6 billion in the first four months, almost P4 billion above the P54.6 billion target for the period. A year ago, the bureau collected only P43.6 billion.

Customs Commissioner Napoleon Morales attributed his agency’s overperformance to improved valuation and auditing of shipments. Likewise, the BOC cited the payment of P1.7 billion in import duties by the National Food Authority last April.

The Development Budget Coordination Committee assigned the BOC a higher value-added tax collection target of P55.4 billion this year, out of a total revenue target of P196.0 billion.

Tax collections climb in Q1

1 May 2006 — The Bureau of Internal Revenue exceeded its P29.1 billion VAT collection target by P3.2 billion in the first quarter. Its VAT collections went up 57.6% to P32.3 billion in the quarter from P20.5 billion a year ago.

At the same time, the agency’s excise tax collections expanded 5.2% to P14.2 billion from P13.5 billion. Sin tax collections on cigarettes also grew 66.7% to P6.5 billion from P3.9 billion. On the other hand, sin tax collections on alcohol products dropped 4.3% to P4.4 billion from P4.6 billion.

Because of mitigating measures to cushion the impact on consumers of the 1 February VAT rate hike, revenues from petroleum products dipped 36.4% to P2.8 billion from P4.4 billion. Tax collections on automobiles and other items also dropped to P500 million from P600 million.

Meanwhile, with the hike in the corporate income tax rate to 35% from 32% beginning November 2005, the Department of Finance expects a 20% increase in corporate income tax collections in the first quarter.

But while the BIR is upbeat on its performance in the first quarter, it expects to fall short by P6.4 billion in terms of its VAT collection target for 2006.

RVAT targets of BoC, BIR changed

27 April 2006 – The Development Budget Coordination Committee raised the Bureau of Customs’ target for reformed value-added tax collections for 2006 to P55.4 billion from P27.3 billion, given the expected increase in collections from oil imports. On the other hand, the interagency body reduced the Bureau of Internal Revenue’s target RVAT collection to P20.4 billion from P46.8 billion. However, the bureaus’ P75 billion combined target RVAT collection, the P974.1 billion overall revenue target, the BIR’s P675.4 billion revenue target, and the BoC’s P196.0 billion revenue target for 2006 remain unchanged.

The Department of Finance wanted to raise the BIR’s target by P2.0 billion due to the revised inflation rate assumption for 2006 of 7.3%–7.9% from 4%–5%. However, BIR Commissioner Jose Mario Buñag asked the DOF for a P6.4 billion cut in the BIR’s target since the agency expects to collect P3 billion only instead of P7.4 billion from the RVAT on petroleum products and to lose P8.8 billion instead of P6.8 billion from mitigating measures on petroleum products.

Cabinet rejects lifting of RVAT on oil

26 April 2006 – The Cabinet, particularly the government’s economic managers, rejected a recent proposal raised by Presidential Chief of Staff Michael Defensor and Albay Congressman Joey Salceda to suspend the 12% RVAT on crude oil and petroleum products to cushion the impact of rising fuel prices on consumers. Salceda proposed the lifting of the RVAT on oil until crude prices settle below US$65 a barrel. The measure, which would cut domestic fuel pump prices by at least an average of P3 per liter, would have required Congress to pass a new law.

Finance Secretary Margarito Teves explained the necessity of the RVAT for the government to be able to pursue spending on infrastructure and social services and to cut the deficit. The government expects to collect P30–35 billion this year from the RVAT on petroleum products out of the P75 billion total RVAT collection target for 2006. Other revenue estimates from the RVAT on oil range from P29-47.8 billion. From November 2005 to February 2006, the government already raised P11.9 billion from imposing the RVAT on oil.

Budget Secretary Rolando Andaya Jr. noted that P22.7 billion worth of infrastructure projects and social services will be funded by RVAT collections this year. The economic managers also pointed out that lifting the RVAT will send a negative signal to financial markets, financial institutions, and credit rating agencies abroad.

Public sector posts narrower combined deficit in 2005

4 April 2006 – The public sector posted a narrower fiscal deficit of P106.0 billion in end-2005 from P232.0 billion in end-2004. According to the Department of Finance, the combined shortfall of the government in 2005 was equivalent to 2.0% of GDP, lower than the 4.9% ratio posted in 2004.

Last year’s performance was also better than the P180.3 billion target, as the national government and the 14 monitored nonfinancial government corporations incurred smaller-than-expected fiscal shortfalls. Furthermore, the surpluses gained by social security institutions, the Bangko Sentral ng Pilipinas, and government financial institutions all surpassed their targets.

However, local government units posted a lower surplus of P13.0 billion in end-2005 from P14.9 billion in end-2004. LGUs also missed their P18.0 billion target.