Philippines President Gloria Macapagal Arroyo admitted in her State of the Nation Address last week that tax collections are running far behind target, while government spending is increasing as planned, so that chances are diminishing of reaching the 3% deficit target she had imposed for this year. And this despite the fact that growth seems likely to come in at or above the government's 4% target.
The problem is that much of the better economic performance is coming from the lightly-taxed agricultural sector, while the Bureau of Internal Revenue (BIR) raised 12% less than projected in the first six months of the year.
Total tax collections this year seem likely to reach only 13% of GDP, while Malaysia for example takes in 20% and Japan collects over 30%. In her Address, Mrs Arroyo said she would take strong administrative measures to improve the situation, focussing particularly on widespread tax evasion and corruption among tax inspectors.
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