Philippines To Tackle Budget Deficit

by Mary Swire, Tax-News.com, Hong Kong

31 July 2009

Half-year figures indicate that the budget deficit in the Philippines has risen above government forecasts, as revenues fell below expectations. However, the government plans to improve tax collections in the second half of the year.

It was announced that the government’s deficit rose to PHP153.4bn (USD3.2bn) in the six months to June 30, from a deficit of PHP18bn in the same period last year. First-half tax revenues have fallen by over 4.3% to PHP545.7bn from last year’s receipts of PHP570bn.

Subsequently, in order that the government can reach its budgeted deficit of PHP250bn, or 3.2% of GDP, for the whole year, plans are being actioned to improve tax collection by up to PHP30bn by the end of the year.

Under the so-called “Oplan Kandado” program operated by the Bureau of Internal Revenue, the businesses of taxpayers are suspended and temporarily closed for VAT transgressions. The program is said to help enhance voluntary compliance among taxpayers and to intensify enforcement activities through improved tax audits and the collection of delinquent accounts.

In addition, the Ports Transparency Alliance, run by the Bureau of Customs, is an ICT-based project to increase revenue collection and strengthen law enforcement so as to eradicate corruption and smuggling in the ports.

The government is also expected to generate an additional PHP30bn before the year end from a privatization program, while Congress has been asked to pass other revenue enhancement measures, such as the rationalization of tax incentives and a simplified net income tax system.

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