In yesterday’s press briefing, Neri said the government trimmed its budget deficit target to P158 billion from the original target of P180 billion due to an estimated drop of P26 billion on interest payments for this year.
Interest on debt accounts for about a third of the budget, widening the deficit that forces the government to sell about P10 billion of treasury bills (T-bills) every week.
The benchmark 91-day T-bill yield fell to a 22-month low of 5.452 percent last week on optimism the Supreme Court will allow Congress to introduce a new expanded value-added tax (EVAT), which the government said would help end 20 years of budget deficits by 2008.
"This year wasn’t a problem, the concern is, if the EVAT doesn’t push through, what happens one, two, three years down the road," said Cecilia Tanchoco, economist at Bank of the Philippine Islands. "We know how difficult it is to legislate in the Philippines," she added.
Even without the new tax, revenue will be P798 billion this year and spending P956 billion, Neri said.
The government will ask Congress to approve a P1 trillion budget for next year, resulting in a P160 billion deficit, Neri said.
Finance Secretary Gary Teves said revenue will be boosted by the sale of assets, such as part of the government’s stake in Philippine National Bank (PNB), which will be auctioned next month, and dividends from government-owned companies.
Teves said he was confident the Supreme Court would declare the EVAT tax law constitutional.
"We must pursue the EVAT so we would be able to attain our balanced budget (zero-deficit) target by end-2008 or earlier," Teves said.
The Supreme Court will hand down a decision next month on whether the new tax law is allowed under the constitution.
Teves also said "much has been accomplished under the fist phase of reforms that were implemented by our respective departments. Our task now is to build on those reform measures and consistently align our policy initiatives with the goal of strengthening the country’s fiscal health and restoring investor confidence in our macroeconomic fundamentals."
"At the DOF, we will vigorously pursue the lifting of the temporary restraining order (TRO) on the VAT Reform Law. We are also conducting a thorough evaluation of the implementation of the sin tax law so that we can maximize potential revenues from this legislated measure. We will further strengthen the implementation of the RATS, RATE (Run after tax evaders), and RIPS programs. Related to this, I have instructed the Bureau of Internal Revenue (BIR) to submit to the DOJ within one month all the additional data needed for the prosecution of cases filed under the RATE program," Teves said.
Phase II of the government’s reform program will see a continued crackdown on tax cheats, increased initiatives against graft and corruption, and the launch investments in job creation, education and healthcare, electrification, roads and transportation infrastructure, and intensive promotion of the Philippines‚ outsourcing and mining industries.
On the RATE program of the BIR, Teves said they would pursue the program as originally designed but with a "process that is fair, transparent and accountable."