The Finance Department has slashed the combined collection goal of the Bureau of Internal Revenue and the Bureau of Customs by a hefty P85 billion in light of the full impact of the global economic meltdown this year.
Instead, Finance Secretary Margarito Teves said the government decided to jack up its borrowings from foreign and domestic creditors this year to fund the wider budget deficit this year.
Teves reported that the expected combined tax take of the BIR and BOC has been reduced to P1.153 trillion or about 14.3 percent of gross domestic product instead of the revised assumption of P1.238 trillion or 14.7 percent of GDP this year.
The target of the BIR was reduced by P45.2 billion to P865.5 billion from the revised assessment of P910.8 billion. Under the proposed 2009 budget, the BIR is tasked to collect P965 billion this year. Last year, it missed its P845 billion collection goal by a record P67 billion after it only managed to collect P778.2 billion.
On the other hand, the government likewise scaled down the revenue target of the BOC by P39.8 billion to P277.2 billion instead of P317 billion. It was originally tasked to collect P310 billion this year. In 2008, customs exceeded its P254 billion collection goal by P6.2 billion after it raised P260.4 billion.
Finance officials attributed the revised goals of both agencies to the slackening domestic economy as well as revised macroeconomic assumptions including lower inflation and the contraction of both exports and imports.
“Lower revenue collection resulting from unfavorable development in exports and imports. Inflation while going down is good for macroeconomic fundamentals but we have number of collection from BIR and external developments so all these indicators on revenue stream will have effect,” Teves said.
Economic managers through the Development Budget Coordination Committee expect the domestic output as measured by GDP expanding between 3.7 percent and 4.4 percent this year instead of 3.7 percent to 4.7 percent.
They also expect exports to contract by 8.0 percent this year and import by 10 percent. Inflation would ease to a range of 3.0 percent to 5.0 percent instead of the revised forecast of 6.0 percent to 8.0 percent.
On the other hand, Teves explained that the government expects more non-tax revenues of P149.2 billion or 1.8 percent of GDP, P21.5 billion higher than the projected P127.7 billion or 1.5 percent of GDP.
This after, the finance department doubled the expected proceeds from the sale of big-ticket government assets to P30 billion from P15 billion. Other sources of non-tax revenues include the income of the Bureau of Treasury as well as fees and charges collected by government agencies.
In all, government revenues is expected to grow only to P1.302 trillion or P63 billion lower than the original target of P1.365 trillion while expenditures would reach P1.479 trillion or about P12 billion higher than the original P1.467 trillion.
This would result to a wider deficit of P177.2 billion or 2.2 percent of GDP this year from P68.1 billion or 0.9 percent of GDP last year. This is also P75.2 billion wider than the original ceiling of P102 billion or 1.2 percent of GDP.
The Philippines relies heavily on foreign and domestic borrowings to finance the budget deficit.
Teves said the government has decided to raise it foreign borrowings to $3.1 billion from $2.6 billion as it decided to source more official development assistance loans from lending agencies led by World Bank, Asian Development Bank, Japan Bank for International Cooperation, and others.
The government, according to him, decided to double the amount of program loans to be sourced from multilateral lending agencies to $1 billion instead of $500 million but retained the amount of project loans at $600 million.
“We need to modify program and we have to increase borrowing from ODA and the balance would come from domestic borrowing. We prefer for more program loans because these are quick disbursing. At the domestic level we have to be sensitive to adjustment of the rate,” he added.
This would result to a change in the borrowing mix wherein 75 percent instead of 76 percent would be sourced from domestic creditors while 25 percent instead of 24 percent would come from foreign sources.