11 September 2009
Debt & Public Finance
– Despite full implementation of reformed value-added tax law and high yields from selling government assets, the government’s revenue effort under Mrs. Gloria Macapagal-Arroyo is the worst among post-Edsa I administrations, according to the Freedom from Debt Coalition.
FDC also called for a comprehensive review of the country’s entire tax structure due to low revenues despite regressive taxation.
Using various government data, FDC said that the Arroyo administration’s average Revenue-to-GDP score, pegged at 15.51% from 2001 to 2008, is less than Corazon Aquino’s 15.53% (1986-1991), Fidel Ramos’ 18.8% (1992-1997), and Joseph Estrada’s 16.3% (1998-2000).
On the tax effort (tax-to-GDP), however, Arroyo score 13.37% – a little higher than Aquino’s 12.76%, but still much less than Ramos’ 16.22% and Estrada’s 14.65%.
“Partida na nga sana yung R-VAT, pero mababa pa rin ang tax effort ni Arroyo. (R-VAT would already have been an advantage, but Arroyo’s tax effort remains to be low),” said FDC vice president Etta Rosales, referring to the Reformed Value Added Tax specified by Republic Act 9337 enacted during Arroyo’s second term.
Rosales also mentioned that Mrs. Arroyo is also “the biggest seller” of government assets among the post-Edsa I presidents, tripling Ramos’ P29.91 billion in 1994 with her P90.62 billion in 2007. Even in 1985 real prices, this is still P13.54 billion versus P18.67 billion.
Among those privatized or intended to be privatized are state-owned assets such as the 120-hectare Food Terminal Inc. (FTI) in Taguig City (P15 billion), the Philippine Telecommunications Investment Corp. (P25.2 billion), the 20% stake in Philippine National Oil Company-Energy Development Corp. (P16.6 billion), the 4.6% stake in Philippine National Bank (P998 million), and the stakes in San Miguel Corp. (P50 billion) and Manila Electric Co. (P10 billion), and the 54-hectare old Iloilo Airport property (P1.2 billion).
“Despite R-VAT and privatization, revenue effort didn’t pick up much. Was this because gross domestic product (GDP) under Arroyo is unrealistically high?” Rosales quipped, referring to FDC’s earlier critique that Arroyo’s GDP computations are overestimated.
Using government’s projected revenues and GDP growth, FDC calculations estimated that the government is targeting a revenue effort ranging from 15.72% to 16.02%, and a tax effort ranging from 14.07% to 14.34% to fund the 2010 national government budget.
Rosales said that the target for tax effort in 2010 is “ambitious,” saying that while the administration is “expecting tax performance as low as 13.75% for 2009, it is dreaming of jumping to as high as 14.34% at the end of 2010 – the highest for the Arroyo administration should it reach this target,” Rosales added.
Rosales, however, expressed apprehension that the Arroyo administration could hit its target, citing the government’s “habit of missing tax targets.”
FDC revealed that for 2005, Arroyo missed her tax targets by P13.7 billion; for 2006, by P20.5 billion; for 2007, by a whopping 70.2 billion; and for 2008, by P44.2 billion. For January to June of this year, it missed its tax target by P32.4 billion.
“Both Arroyo’s revenue performance and the tax system she operates on are the reasons why we have less and less funds for our services, which force them to borrow as debt servicing is automatic. These chronic fiscal problems must be addressed once and for all,” Rosales said. Tax structure
“Since revenue and tax efforts are not improving that much anyway, we suggest that the entire tax structure be reviewed by Congress and Malacañang – starting with RA 9337 and the R-VAT which shifted the burden of the fiscal crisis from the government to the backs of millions of taxpayers,” Rosales said.
Rosales said that “low revenues despite regressive taxation must already signal the need for a comprehensive assessment of what is wrong with our tax system.”
Department of Budget and Management (DBM) Chief Rolando Andaya earlier felt “disappointed and alarmed” by the collection shortfall of the BoC and BIR because of its effects on government’s expenditures program. -30-