Aquino govt wants deficit squeezed to 2% of GDP

The administration of President Benigno Simeon Aquino III wants to reduce the deficit and narrow it down to 2 percent of the gross domestic product, Finance Secretary Cesar Purisima said Wednesday. "We are not targeting a balanced budget, which we believe is not necessary at this point to support programs like conditional cash transfer in education and agriculture," Purisima said during the Aquino administration’s first press conference after the president held his first Cabinet meeting. "Being more efficient on expenditure and revenue sides, that is our goal," Purisima said. The finance department will sit down with the National Economic Development Authority and the Department of Budget and Management "to make sure we are coordinated in this effort," he said. Collection efficiency And despite the growing clamor for President Aquino to address the burgeoning deficit by imposing new taxes, Purisima said that the administration would address the problem by encouraging evaders to settle their obligations with the government. "I'd like to appeal to our fellow citizens and businessmen, if we really want President Aquino to really succeed, if we want to have a better country, there is really no choice but to pay what is due the government, Purisima said in Wednesday’s first press conference by the new administration after holding its first Cabinet meeting. "You have the assurance of the new administration that the quality of governance will be better than the past. Our goal is to be as transparent as possible and to make sure that the money of the public is spent wisely. Purisima said. In his speech earlier at the Luneta where he was inaugurated the office of the president, Aquino said in Pilipino that there would be no poverty if there are no corrupt people in government. "It’s not simply a slogan, it’s going to be the way we are going to do things in this administration," Purisima said. "That's an appeal to our fellow Filipinos. You cannot just sit in your living room and say how you can improve the efficiency of tax collections. The bureaucrats will have to step up on this," Purisima added. Citigroup economist Meanwhile, American bank Citigroup has joined the call for Aquino to lay down a comprehensive medium-term policy package, including new tax measures. The package should focus on addressing the revenue erosion brought about by the package of tax policy breaks approved during the term of former President Gloria Macapagal-Arroyo, Citigroup economist Jun Trinidad said. "Other than improve collection efficiency, we believe Aquino's fiscal strategy should address the revenue erosion from the tax policy breaks approved by previous Congress, such as the senior citizens' value added tax discount," Trinidad said. The president should use the current political goodwill early in his term to push for new measures involving the Expanded Value Added Tax, according to Trinidad, saying it should be now than later when other policy challenges would have emerged. Increasing the current VAT rate from 12 percent to 15 percent in an E-VAT regime could help raise up to P50 billion in additional tax collections, Finance Secretary Margarito Teves earlier said. The Finance Department estimated that the government stands to lose P50 billion to P60 billion a year from the tax breaks the Arroyo administration had approved, eroding the revenues from the E-VAT. He explained that the new government should focus of improving the ratio of the taxes to the domestic output as measured by the gross domestic product (GDP) by improving collection efficiency and reducing tax erosion. Trinidad agreed that the Aquino administration should overhaul the revenue agencies under the Finance Department. "We believe part of the fiscal agenda should involve a restructuring plan for the BIR and the BOC to produce quasi-autonomous institutions liberated from the national and political interference." Amending the charters of the Bureau of Internal Revenue and the Bureau of Customs would attract young talented professionals to these agencies raising the standards of management and rank-and-file while reduce corruption. The more pressing issue now remains the deficit, Citibank said. The Philippines is in dire need of fresh revenues after its budget deficit swelled to an all-time high of P298.5 billion, or 3.9 percent of GDP, last year from P68.4 billion or 0.9 percent of GDP in 2008. "We believe that the Aquino administration will finally spell out his fiscal agenda that won't deviate from his campaign conviction to reduce corruption, improve tax compliance and thus hike in a short period of time, collection efficiency without raising new taxes," Trinidad said. In order to trim the budget deficit and generate savings, Citigroup said the Aquino regime should push for the consolidation of fiscal incentives and reforms in the existing excise tax on tobacco and liquor. —VS, GMANews.TV