BIR Commissioner Rene Banez admitted the tax collection agency is no longer optimistic about meeting its collection targets but added the proposed administrative measures should be able to offset the expected decline in tax collection this year.
"Realistically speaking, it will be difficult to meet original targets, especially since government already lowered its growth targets, that’s why we hope to be able to get approval for these measures and implement them at once," Bañez said.
For the first five months this year, BIR’s tax collection efforts fell short by P11 billion with total collections reaching only P167.143 billion
About 80 percent of government’s revenues come from BIR’s tax collections. With the difficulty in imposing tax measures, the BIR had asked the Department of Finance to allow it to reduce its whole-year target by P5 billion or from P408 billion to P403 billion.
These measures include pushing through with an earlier plan of the BIR to go into a compromise with several known and alleged big time tax evaders.
The other measures include the implementation of documentary stamp tax metering in the second half of the year which is expected to generate an additional P5 billion in tax income.
Bañez said the BIR hopes to be able to come up with more "creative measures" to increase its tax collections and boost government’s efforts to manage its budgetary shortfall this year of P145 billion.
Bañez said the BIR and the DOF will decide this week on the new revenue target of the tax collection agency which will then be presented to the inter-agency Development Budget and Coordination Committee (DBCC).
The budget deficit of the government surged to P58.326 billion in the first five months, from P28.097 billion in April, as revenues continued to weaken while expenditures went up amidst the slowing economy.
During the period, government continued to be plagued by poor collection, with total revenues reaching only P229.746 billion, about P5-billion short of its P236.025-billion target.
Total expenditures for the period was P288.025 billion, with May accounting for close to half or P140 billion as against a target of only P69.196 billion for the month.
Because of the increase in government’s budgetary shortfall, analysts said government may have trouble meeting its deficit target this year. The deficit widened despite austerity programs implemented by the Arroyo administration which generated savings of P10 billion.
Analysts added the government will have difficulty sticking to its budget deficit target, especially since it downscaled its macro-economic targets.
Resolving the fiscal imbalance is the key for the Philippines to get a better credit rating from international credit rating agencies notably Standard & Poor’s and Moody’s. These agencies have downgraded the country’s credit outlook to "negative" from "stable" in 2000.
An improvement in the credit rating would help the Philippines raise cheaper funds abroad since investors would not demand for higher turns on their funds.
The government’s failure to meet the fiscal target has been the sorest spot in the previous administration, turning off potential investors. It failed to complete its program with the International Monetary Fund as a result of this. As a result, foreign creditors are now asking for higher interest rates on borrowings of the government and even the private sector.