The Government of the Republic of the Philippines Fiscal Sector Secretary Gary B. Teves Department of Finance The Philippines: Making Things Happen Mid-Year Economic Briefing 05 September

The Government of the Republic of the Philippines Presentation Outline I. What have we achieved so far? II. What do the numbers tell us? III. What’s next on the policy agenda?

The Government of the Republic of the Philippines I. What Have We Achieved So Far?

The Government of the Republic of the Philippines Implemented fiscal consolidation program with clear reform targets Implemented fiscal consolidation program with clear reform targets MeasuresStatus Increased power generation tariffs Raised sin taxes Broadened the VAT base Reduced excises on petroleum products Changed VAT refund procedures Raised the VAT rate from 10 to 12 percent Implemented the Lateral Attrition Law Rationalization of fiscal incentives Simplified net income tax for self-employed Fiscal responsibility bill Ongoing

The Government of the Republic of the Philippines II. What Do The Numbers Tell Us?

The Government of the Republic of the Philippines Continued reduction in NG deficit Continued reduction in NG deficit (In Billion Pesos) NG Deficit ProgramActual Jan-Dec 2005 % of GDP Jan-Jul 2006 % of GDP % 122.0* % 48.5 (In Billion Pesos) CPSD ProgramActual Jan-Dec 2005 % of GDP Jan-Mar 2006 % of GDP % % % % CPSD better than programmed CPSD better than programmed Debt growth slowed down Debt growth slowed down (In Billion Pesos) NG Outstanding Debt ProgramActual as of end-Dec 2005 % of GDP as of end-Mar 2006 % of GDP 4, , , *Jan-Sep 2006

The Government of the Republic of the Philippines Fiscal performance on track Jan-Jul 2006 collections higher by 20.0%Jan-Jul 2006 collections higher by 20.0% Deficit is P34.1 billion lower year-on-year Deficit is P34.1 billion lower year-on-year National Government Revenue Collections January - July 2006 (In Billion Pesos) January – July Actual Percent Growth 2006/2005 Program Difference REVENUES BIR BOC BTr Income (2.2)(5.1)51.8 Others (1.9)(7.1)50.8 EXPENDITURES ,100.5 SURPLUS/(DEFICIT) (34.1)(41.3)124.9 Source: BTr Report

The Government of the Republic of the Philippines (In Billion Pesos) 2005 Actual 2006 FY Program Jan-Jul 2006 Actual Net Financing External (Net) External (Gross) Less: Amortization Domestic (Net) (30.2) Domestic (Gross) Less: Amortization Change in Cash Budgetary Non-Budgetary(66.9)(23.7)1.1 Financing Mix Foreign39%42%38% Domestic61%58%62% Financing Requirements 2006 Financing Requirements

The Government of the Republic of the Philippines III.What’s Next On The Policy Agenda?

The Government of the Republic of the Philippines Policy Objectives Further improve tax and revenue effort Balance NG budget by end-2008 Achieve consolidated public sector surplus by end-2008 Cut NG debt by end-2010

The Government of the Republic of the Philippines Improve tax and revenue effortsImprove tax and revenue efforts Policy Objectives %

The Government of the Republic of the Philippines NG debt cut to 43% of GDP by end-2010NG debt cut to 43% of GDP by end-2010 with EVAT and other admin. revenue enhancement measures Policy Objectives % of GDP

The Government of the Republic of the Philippines Balanced NG budget by end-2008Balanced NG budget by end-2008 P Billion with EVAT and other admin. revenue enhancement measures Policy Objectives

The Government of the Republic of the Philippines % of GDP CPSD surplus by end-2008 CPSD surplus by end-2008 with EVAT and other admin. revenue enhancement measures Policy Objectives

The Government of the Republic of the Philippines Policy Directions Ensure effective implementation of EVAT law Maintain VAT rate on power and fuel despite volatile world oil prices Implement EVAT reporting mechanism (A.O. 141) Continue EVAT information campaign

The Government of the Republic of the Philippines Institute transparency in the use of taxesInstitute transparency in the use of taxes - Starting with E-VAT (A.O. 141) Periodic report on the use of proceeds Improve collections More resources for infra and social services Continue communicating benefits Policy Directions

The Government of the Republic of the Philippines Policy Directions Sustain improvements in tax collection Intensify collection efficiency and governance BIR and BOC Action Plans to enhance collection efficiency Lateral Attrition Act Strengthen governance measures Run After Tax Evaders (RATE) Run After The Smugglers (RATS) Revenue Integrity Protection Service

The Government of the Republic of the Philippines Strengthen GOCC performance oversight Institute performance contracts Pursue proactive liability management Increase share of domestic financing Lengthen maturity profile Maximize ODA financing Develop the domestic capital market Legislative Measures: PERA Bill, Insurance Code, Pre-Need Code Improve market infrastructure Policy Directions

The Government of the Republic of the Philippines RevenuesExpenditures (In Trillion Pesos) Capital Current (NG SONA Projects = P184.5B) 20% 80% Increase infrastructure spending ( ) Increase infrastructure spending ( ) Policy Directions

The Government of the Republic of the Philippines SONA Projects P369.0 B (NG share: P184.5 B Balance from: GOCCs, LGUs, GFIs, private sector) Medium-Term Philippine Investment Plan (MTPIP) Projects P928 B Funding for SONA projects, Funding for SONA projects,

The Government of the Republic of the Philippines Fiscal Sector Secretary Gary B.Teves Department of Finance The Philippines: Making Things Happen Mid-Year Economic Briefing 05 September