Gov’t Focus: Stronger Fiscal Position

Manila Bulletin (January 13 2013) - The Department of Budget and Management (DBM) expects the tax effort of the government to continue improving in the coming years in keeping with its ultimate goal of reducing public debt while increasing its tax take that should ensure a stronger and healthier fiscal position for the country.

Data from the DBM showed that the national government plans to downscale its budget deficit to 2 percent of the country’s gross domestic product (GDP) starting this year up to 2016 when President Aquino’s term ends.

“The fiscal year 2014 budget will continue the policy of fiscal consolidation,” the DBM said in its national budget memorandum that kicked off the preparation for the Aquino administration’s budget for next year.
Aside from reducing the government fiscal deficit, the DBM said that the country’s tax effort would, likewise, continue to increase to around 17 percent by 2016.

“The ultimate objective is to reduce the public debt and increase the government’s tax take to levels comparable with peer countries for a stronger and healthier fiscal position,” the DBM said.
In the first semester of last year, the government’s tax effort increased to 13.3 percent despite the absence of any new revenue measure from 12.7 percent in the same period in the previous year.

Meanwhile, as of October 2012, the national government debt stood at P5.359 trillion, while its budget deficit was at P127.3 billion at end-November, well below the P279.1 billion ceiling for the year, equivalent to 2.6 percent of the country’s GDP.

“In view of the continuing economic weakness of Europe and the United States, it will be prudent for the government to strengthen its fiscal position and sustain its fiscal reform,” the DBM said.

The budget department cited the need for more revenue generating measures.

The Department of Finance (DOF) and the DBM have lined up several proposed measures to bolster state revenues, including the rationalization of fiscal incentives and the new mining regulations.

“The success of these reforms will depend on the government’s strategy of aggressively pursuing tax administration reforms to improve tax compliance, expanding its revenue base, and further sharpening its sector and geographical expenditure prioritization and execution,” the DBM said.

“These reforms will also determine the extent of government’s ability to use its expenditures to push domestic economic activity,” the department added.

Last year, President Aquino signed into law the long-delayed new excise tax law that is expected to generate additional P33.5 billion in revenues for 2013.

Proceeds of the excise tax reform law will be used for the government’s universal healthcare  program and the livelihood, training, and assistance needs of tobacco farmers and workers in the alcohol industry.


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