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Gov’t eyes lower deficit as economic upswing sets in


The government expects a lower budget shortfall this year as it improves tax collections amid the recovering economy, a Cabinet official said on Monday. "We expect better economic performance this year and this will lead to higher government revenues and thus, [a] lower deficit," Acting Socioeconomic Planning Secretary Augusto B. Santos told BusinessWorld in a text message. Santos did not disclose figures but his statement followed comments earlier in the day by Deputy Presidential Spokesperson Gary B. Olivar, who told reporters that as economic recovery continues to spread the tax base continues to widen. "This is all good news for our deficit management," he added. Adding to the optimism were remarks by a Finance official that the country’s main revenue-generating agencies would likely top their targets for a second straight month in February. "What I heard is we’re doing fine on the revenue front," Finance Undersecretary Gil S. Beltran told reporters. "January is very good and February so far is also very good." The Bureau of Internal Revenue (BIR) and the Bureau of Customs (BoC), which together take in over four-fifths of total state revenues, were exceeding daily collection goals, he said. The BIR aims to collect over P48 billion ($1.04 billion) in February, BIR commissioner Joel L. Tan-Torres said in a text message to reporters. The Customs bureau wants to collect P18.42 billion ($399.3 million) in February, commissioner Napoleon L. Morales said in another text message. The BIR, which collects around two-thirds of state revenues, was estimated to have exceeded by a tenth its P56-billion goal in January, according to Treasury documents. Customs was a quarter ahead of its P17.6-billion target last month. Last year, collections of both agencies fell below their goals as a slow economy resulted in lower Customs receipts and income tax collection. The BIR’s collections fell by 6 percent and Customs’ by 19 percent against the goal. The Philippines has had difficulty raising tax revenues due to widespread evasion, corruption and weak implementation of tax laws, leading to a record budget deficit last year as collections failed to keep pace with spending to stimulate the economy amid the global downturn. The government incurred a shortfall of P298.5 billion last year, equivalent to 3.9 percent of the gross domestic product (GDP), slightly over its worst-case estimate of P298 billion. It had held out the hope that the deficit, way over the year’s cap of P250 billion, would be limited to P290 billion. The target for this year is P293 billion, or roughly 3.5 percent of the GDP. "If we have problems with a number like P290 billion last year, we would expect to have even fewer problems with that number this year all on account of the spread in global recovery," Olivar said in a teleconference. He also said the next Congress should consider passing revenue-enhancing measures following the spate of taxpayer-friendly bills that were signed recently. President Gloria Macapagal-Arroyo recently enacted Republic Act 9994 or the Expanded Senior Citizens Act, which exempts the elderly from the value-added tax. The state expects to forego P1.7 billion annually because of this. Another measure up for signing — the exemption of life insurance policies from certain taxes — will also result in P1.7 billion in foregone revenues yearly, the Finance department has said. "At this point we would continue to urge that revenue enhancing measures be passed and revenue-eroding measures be deferred," Olivar said. Benjamin E. Diokno, an economist at the University of the Philippines, said things could still change. "We have the El Niño [weather phenomenon] and that might result in lower production, which will in turn result in lower consumption. When consumption is lower, we have lower taxes," he said in a telephone interview. "If you go by track record, they always change the forecasts and targets. We are not yet too sure of what will happen for the rest of the year," Diokno added. He also said unpaid obligations such as bonuses of public school teachers, which were supposed to have been settled in December 2009, could add up to the government’s expenses this year. — BusinessWorld with a report from Reuters