First half to be 'difficult' due to lower tax take

MANILA, Philippines - Tax collections could suffer with the first half of 2009 likely to be "difficult" as a global economic downturn bites, Finance Secretary Margarito B. Teves said. "We don’t know whether the recession in Europe, United States, and Japan will last very long. The longer and deeper it is, the more stressful it will become for the Philippines," he told reporters on Wednesday night. "I cannot say we have seen the worst of it. I only know that in terms of broad strokes, the first half of 2009 ... will be much more difficult than what we have seen in the last two years." His sentiments were echoed by Sixto S. Esquivias IV, commissioner of the Bureau of Internal Revenue (BIR) which is the government’s main revenue earner, although both did not provide estimates. The government has targetted P1.24 trillion in tax revenues this year, with the BIR mandated to collect P910.9 billion and the Bureau of Customs P317 billion. The total revenue goal is P1.36 trillion, including P128 billion in non-tax funds. Expenses were set at P1.47 trillion for a P102-billion deficit, equivalent to 1.2 percent of gross domestic product (GDP). The 2008 deficit goal was P75 billion, equivalent to 1 percent of GDP. The government expects the final figure, to be reported this month, to stay below the cap even if the BIR has said it failed to reach its P845-billion goal. Proceeds from the sale of the government’s stake in Petron Corp., along with royalty payments from the operators of the Malampaya natural gas project, filled Treasury coffers last month. Mr. Teves said the government will focus on improving tax administration and push for the passage of revenue-enhancement measures by Congress. "We will have to work on tax administration, collection efficiency and work on our actual plans," he said. The Finance department has been pushing for the approval of bills rationalizing the grant of fiscal incentives, restructuring sin taxes and reinstituting a simplified net income taxation scheme for professionals and self-employed individuals. "We are going to review the revenue target but it will not mean we will go upwards or downwards. We will review and ask ourselves whether we can maintain it on a quarter-to-quarter basis," Mr. Teves said. "We are just at the start of the year. It is hard to make any prediction without even a sense of how the numbers will go." Mr. Teves said the government needs to ensure it collects programmed revenues since it plans to raise spending on infrastructure and generate jobs. The BIR’s Mr. Esquivias, for his part, said "We don’t know what is in store for us this year. The economy is not doing well. It is expected revenues will not be good but we will do our best." He said the tax agency was stepping up efforts to run after tax evaders with the issuance of a revenue memorandum order to close down establishments not paying the correct taxes. Oplan Kandado will likely be launched this month. "In the US, the Internal Revenue Service is the most feared institution. The BIR should show its capability [to be the same]," he said in a separate interview. Mr. Esquivias, who took over the BIR late last year, said 98 percent of tax collection comes from voluntary compliance while 2 percent is sourced from enforcement activities. - Ruby Anne M. Rubio, BusinessWorld