WB urges RP to focus more on tax collection

The World Bank has cautioned the Philippines against relying heavily on non-tax revenues from the sale of big-ticket government assets to put its fiscal house in order. Joachim von Amsberg, WB Philippine country director, said in an interview with reporters over the weekend that the government should put more emphasis on improving tax collections rather than relying on the proceeds from the privatization of government assets. “The privatization revenues are one time revenues, they are not sustainable. They are positive reflection of privatization program that is on going but they are not substitute for the tax effort because they are just one-time sale of government assets," he warned. The Philippines managed to trim the budget deficit by 53.9 percent to P18.6 billion in the first two months of the year from P40.4 billion in the same period last year. It managed to post a surplus of P11.1 billion for the month of February after its was able to raise P25.2 billion from the sale of its 46 percent stake in Philippine Telecommunications Investments Corp. (PITC) to Hong Kong-based conglomerate First Pacific Co. Ltd. The stake is equivalent to a 6.4 percent interest in Philippine Long Distance Telephone Co. Revenues grew 18.5 percent to P162.3 billion from January to February this year compared to P136.9 billion in the same period last year while expenditures inched up by two percent to P180.9 billion from P177.3 billion due to the delay in the signing of the 2007 national budget. However, the tax take of the Bureau of Internal Revenue (BIR) decreased by P200 million to P91 billion from P91.2 billion while that of the Bureau of Customs (BOC) fell P400 million to P25.2 billion from P25.6 billion. Von Amsberg told reporters that delivering on the promised revenues this year is very critical for the Philippines to be able to sustain the fiscal and economic gains as well as it credibility. “Yes we are taking note of the disappointing tax collection in the first two months but we really look more at the quarterly and annual figures since monthly tax collections tend to fluctuate," he stressed. The Philippines has committed to balanced it budget by the end of 2008 or two years ahead of the original 2010 schedule under the Medium Term Philippine Development Plan (MTPDP). It hopes to narrow the budget gap to P63 billion or 0.9 percent of gross domestic product (GDP) this year from an eight year low of P64.8 billion or one percent of GDP last year. The government sees total revenues increasing 14.3 percent to P1.118 trillion or 16.7 percent of GDP this year from P979.6 billion or 16.3 percent last year. Tax revenues would increase 16.8 percent to P1.003 trillion from P859.2 billion while non-tax revenues would decline by 3.3 percent to P115.6 billion from P119.5 billion. The tax take of the BIR would increase 17.5 percent to P765.9 billion from 652.7 billion while that of the BOC would improve 15.2 percent to P228.2 billion from P198.2 billion. Proceeds from privatization would jump 340.5 percent to P25.6 billion this year from P5.8 billion last year and would help offset the 27.6 percent decline in the revenues of the Bureau of Treasury (BTr) to P53.5 billion from P74.4 billion. Von Amsberg said multilateral lending agencies would like to see the Philippines being able to balance its budget by improving tax collections rather than cutting back on much needed expenditures on infrastructure and social spending. “When we talk of the double objective of balancing the budget next year and at the same time increasing expenditures, the only way you can do this is by increasing taxes," the WB executive stressed. He added that economic managers should be able to keep its word on balancing the budget by next year so the country would not lose its credibility in the international market. “If sustained it will not threaten the credibility of the Philippines is earning with a lot of hard work. Credibility takes years to build and very little time to erode and that is the lesson that the government has understood," he said. - GMANews.TV