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Dept of Finance DBCC Presentation, Aug 6, 2014
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5/21/2018 2015 Budget Dept of Finance DBCC Presentation
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NG Fiscal Performance
and
CY 2015 NG Fiscal Program
Department of Finance
August 6, 2014
Secretary CESAR V. PURISIMA
DBCC Presentation to the House Committee on Appropriations
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Outline of Presentation
I. NG Fiscal Performance
II. 2015 NG Fiscal Program
III. Key Legislative Initiatives
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I. NG Fiscal Performance
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Revenues continue to grow double digit and faster
than nominal GDP growth
(in Billion Pesos) 2011 2012 2013
Total Revenues 1,359.9 1,534.9 1,716.1
% of GDP 14.0 14.5 14.9
% Growt h 12.6 12.9 11.8
Tax Revenues 1,202.1 1,361.1 1,535.7
% of GDP 12.4 12.9 13.3
% Grow th 9.9 13.2 12.8
BIR 924.2 1,057.9 1,216.7
% Growt h 12.3 14.5 15.0
BOC 265.1 289.9 304.9
% Grow th 2.3 9.3 5.2
Non-Tax Revenues 157.0 165.5 177.5
% Grow th 38.4 5.5 7.5
Income from Treasury Operations 33.5 44.7 47.5
Privatization 0.9 8.3 2.9
Expenditure 1,557.7 1,777.8 1,880.2
% of GDP 16.0 16.8 16.3
Surplus / (Deficit) (197.8) (242.8) (164.1)
% of GDP -2.0 -2.3 -1.4
Nom inal GDP Grow th 7.8% 8.8% 9.3%
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Sin Tax Law boosted 2013 revenues
2013
(in billion Pesos) Projected Actual Difference
Tobacco 23.4 41.8 18.4
Alcohol 10.6 9.3 -1.2
TOTAL 34.0 51.2 17.2
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Reversing declining trend of excise tax collections from
tobacco and alcohol
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BETTER COMPLIANCE SOCIAL GAINS
Agency 2010 2014 2014 vs
2010
DepEd P173.0 B P336.9 B 95%
DOH P29.3 B P87.1 B 197%
DPWH P135.6 B P213.5 B 57%
DSWD
o.w. CCT
P15.4 B
P10.9 B
P79 B
P62.6 B
413%
473%
Source: DBM
Increased revenue efforts Greater spending on social services
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FITCH RATINGS
Upgraded to BBB- /Stable from BBB+; Investment Grade
(March 27, 2013)
Affirmation(March 25, 2014)
JAPAN CREDIT RATINGAGENCY (JCRA)
Upgraded to BBB /Stable from BBB- /Positive; Investment Grade(May 7, 2013)
Affirmation(May 30, 2014)
STANDARD & POOR
S
Upgraded to BBB-/Stable from BB+/Stable; Investment Grade
(May 2, 2013)
Upgraded to BBB /Stable from BBB- /Stable; Investment Grade
(May 8, 2014)
RATING & INVESTMENT (R&I)
INFORMATION, INC.
Upgraded to BBB /Stable from BBB- /Positive; Investment Grade
(July 9, 2014)
MOODY
SBaa3 Positive
Investment Grade (Oct. 3, 2013)
Achieved Investment Grade in 2013
from Major International Rating Agencies
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Tightening of Credit Default Swap (CDS) levels
investor confidence in Philippine debt securities has surpassed
Indonesia and Thailand; is now at par with Malaysia
0
50
100
150
200
250
300
350
Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14
Indonesia Thailand Philippines Malaysia
Philippines & Indonesia are ranked below
Thailand and Malaysia
Philippines has matched
Malaysia as the most trusted
sovereign issuer in the
region
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31.6
23.622.6
24.8 24.3
20.5 20.418.8
15
20
25
30
35
2006 2007 2008 2009 2010 2011 2012 2013
Interest Payments/Revenue
29.7
23.321.4
19.6 19.317.9 17.6 17.2
15
25
35
2006 2007 2008 2009 2010 2011 2012 2013
Interest Payments/Expenditure
More funds are being allocated to productive spending as share of Interest Payment to expenditures declines
in %
Revenues allocated to debt service have declined drastically
in %
Creating More Fiscal Space
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In Billion Pesos
2013
Jan-Jun
2014
Jan-Jun
Actual Actual Growth Rate
Total Revenues 839.5 933.7 11.2%
Tax Revenues 746.3 824.4 10.5%
BIR 593.7 643.2 8.3%
BOC 145.1 173.4 19.5%
Other Offices 7.5 7.8 4.4%
Non-Tax Revenues 92.9 107.6 15.9%
Income from Treasury Operations 24.1 52.7 118.8%
Privatization 0.3 1.7 513.6%
Expenditure 890.8 987.8 10.9%
Surplus/(Deficit) (51.3) (54.0) 5.2%
First semester 2014 total revenue growth
continues to be double digit
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Reform in the Bureau of Customs
Measures Undertaken, among others:
Personnel movements and the appointment of new officials and staff, a
new Commissioner, and six (6) new Deputy Commissioners
Creation of new offices under the DOF which are tasked to review current
systems in revenue-generating agencies to increase collections and
modernize operations:
Office of Revenue Agency Modernization (ORAM) (EO 139, s. 2013)
Customs Policy Research Office (CPRO) (EO 140, s. 2013)
Moving the Post Entry Audit Functions to the Fiscal Intelligence Unit(EO 155, s. 2013)
Resulted to an increase in BOCs cash collections to Php 173 billion for
the period January to June, 2014, a 19.5% improvement from the
collections in the same period in 2013.
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Challenges in tax collection remain
1. Several gaps exist in tax collections:
1. Self-employed0.8%-2% of GDP (WB, DOF)
2. Compensation income earners0.3% of GDP (WB)
3. Corporate income tax1.4% of GDP (WB)
4. VAT Gap3.0-3.2% of GDP (IMF)
5. Tax incentives1.5% of GDP (DOF, WB)
6. Smuggling Gap1%-2.8% of GDP (DOF, WB, GFI)
2. Self-employed collections have improved by 13.7% YoY
from P15 bn in 2012 to P17 bn in 2013. Our target is tohave P200 billion by 2016.
3. Estate tax collections contracted 21% YoY: Estate tax
collected went down from 2.2 bn in 2012 to 1.7 bn in 2013.
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Ridiculously low tax payments across regions
Source: BIR Form 1209 Statistics
LocalityAverage
collection
Makati City 73,825
Quezon City 51,066
Butuan City 49,435
Puerto Princesa City 45,935
Quezon Prov 45,573
Tacloban City 38,104
Manila City 35,474
San Fernando, La Union 31,932
Iligan City 24,744
Masbate 21,487
South Cebu City 20,766
Paranaque 20,461Davao City 20,314
Cagayan de Oro City 20,064
San Juan 19,129
Ilagan, Isabela 18,333
Kalibo, Aklan 15,347
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Ridiculously low tax payments
1 out of 2 self-employed accountants, doctors,and lawyers in Makati paid less tax* than a
public school teacher.
# of SEPs # of SEPs whopaid less than
P35,000
%
2,028 1,106 54.5%
*P35,952 = Annual income tax of a public school teacher earning
P21,500/month
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II. 2015 NG Fiscal Program
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Medium-Term Fiscal ProgramContinued fiscal consolidation by increasing revenue effort
creates more fiscal space
13.4 14.0 14.5
14.9 15.7 16.5
17.5 17.9
12.1 12.4 12.9 13.3
14.7 15.5
16.6 17.0
16.916.0
16.8 16.317.8 18.5 19.5 19.9
-3.5-2.0 -2.3
-1.4-2.1 -2.0 -2.0 -2.0
-5.0
0.0
5.0
10.0
15.0
20.0
2010 2011 2012 2013 2014 2015 2016 2017
% of GDP
Expenditures
Revenues
Tax Effort
Deficit
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2015 Fiscal Program..In line with medium term fiscal objectives
In Billion Pesos 2013 2014 2015 Growth RateActual Program BESF (2015/2014)
Total Revenues 1,716.1 2,018.1 2,337.3 15.8%
% of GDP 14.9 15.7 16.5
Tax Revenues 1,535.7 1,879.9 2,194.4 16.7%
% of GDP 13.3 14.7 15.5
BIR 1,216.7 1,456.3 1,720.8 18.2%
BOC 304.9 408.1 456.5 11.9%
Other Offices 14.1 15.5 17.1 10.3%
Non-Tax Revenues 177.5 136.1 140.9 3.5%
Income from Treasury Operations 47.5 35.6 37.3 4.8%
Privatization 2.9 2.0 2.0 0.0%
Expenditure 1,880.2 2,284.3 2,621.0 14.7%
Surplus/(Deficit) (164.1) (266.2) (283.7) 6.6%
% of GDP -1.4 -2.1 -2.0
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Prudent Liability ManagementIncreasing reliance on domestic financing sources and improved debt sustainability
Program
56%66% 65%
84% 89%
83% 86%
44%34% 35%
16% 11% 17% 14%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2009 2010 2011 2012 2013 2014 2015
Domestic ForeignProgram Program
NG FINANCING PROGRAM
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General Government DebtLower than NG debt to GDP ratio; aimed at ensuring sustained fiscal space
throughout the medium term bringing it down to 30% goal by 2016
GG Debt is composed of the National Government debt (less the debt held by the Bond
Sinking Fund), the debt of Social Security Institutions (GSIS, SSS and PhilHealth ) and the
LGUs
54.852.4 51.0 51.5
49.2
44.3
42.2 41.4 40.6 39.2
25
30
35
4045
50
55
60
65
70
2009 2010 2011 2012 2013
National Gov't Debt General Gov't Debt
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(241.4) (355.8) (175.1) (192.1)19.2
(133.7) (155.2)
-3.1
-4.0
-1.8 -1.8
0.2
-1.0 -1.1
-5.0
-4.0
-3.0
-2.0
-1.0
0.0
1.0
-500.0
-400.0
-300.0
-200.0
-100.0
0.0
100.0
2009 2010 2011 2012 2013 2014 2015
% of GDPPhpbn
BESF
Consolidated Public Sector Financial Position to remain low at 1.1% of GDP due to lower NG deficit and improved GFI and LGU
performance
Program
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III. Key Legislative Initiatives
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DOF Legislative Priorities
Customs Modernization
and Tariff Act (CMTA)
Fiscal Regime for Mining
Industry
Valuation Reform Act
The bill aims to promote and secure international trade, protect government revenue and
modernize customs and tariff administration by adopting customs policies, rules and
procedures which are clear, transparent and consistent with international agreements and
customs best practices.
Status: Pending in the Committee on Ways and Means in the House and in the Senate
The proposed bill seeks to institutionalize reforms in land and real property valuation which
will translate into improved real property and related taxes.
Status: Pending in the Senate Committee on Ways and Means and Local Government and
House Committee on Government Reorganization
The plan is to design a scheme which adopts a single fiscal regime and a simple formula in
determining the sharing arrangement.
Status: The Mining Industry Coordinating Council has submitted the draft bill to the
Presidential Legislative Liaison Office.
Tax Incentive Management
and Transparency Act
(TIMTA)
The bill seeks to foster transparency and accountability in the grant of tax incentives and to
institutionalize a system of monitoring and reporting tax expenditures.
Status: Pending in the Committee on Ways and Means in the House and in the Senate
Fiscal Incentives
Rationalization (FIR)
The bill seeks to institute structural reforms and policy to enhance transparency andaccountability in the grant and administration of tax incentives.
Status: Pending in the Committee on Ways and Means in the House and in the Senate
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Thank you!
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BACK-UP SLIDES
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Efficiency of Tax Collection across selected Southeast
Asia countries
11.3 12.0
12.9
15.0 15.3 16.2
20.5
0
5
10
15
20
25
Indonesia Cambodia PHILIPPINES Lao PDR Thailand Malaysia Vietnam
Tax Effort, 2012
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Budget deficit/surplus to GDP across selected Southeast
Asia countries
Source: CIA World Factbook
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Challenges in tax collection remain: Various fiscal
incentives and revenue eroding proposals can result in
annual foregone revenues close to P700 Billion
Proposals
Revenue foregone
(in billion pesos)
1
Increasing 13th month pay tax exemption ceiling
from P30,000 to a range of P40,000 to P75,000, or
removing the ceiling altogether 10
62
2 Taxing only the increment to minimum wage 60
3
Continuous grant of fiscal incentives under existing
regime 161350
4 Other revenue-eroding measures in the 16th
Congress 201 - 217
Total foregone revenues 432689
*Does not include foregone revenues of BOC
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-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
35%
40%
Gains from the Presidents Customs Reform Program:BOC cash collections grew by 19.2% in the reform period, vs 4.9% pre-reform
Reform Period
19.2% YoY
Pre-Reform Period
4.9% YoY
Bureau of Customs year-on-year growth in collections, Jan 2013 - June 2014
Year-o
n-YearGrowth(%Y
oY)
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Gains from Customs Reform: Valuations of plastic resins
(HS 3901-3903) improved by up to 102% YoY in 2Q 2014
Pre-Reform Period Reform Period Growth
HS Code 4Digit Description 2013 Q1 2013 Q2 2013 Q3 2013 Q4 2014 Q1 2014 Q2 2014 Q1 YoY 2014 Q2 YoY
3901 Polymers of Ethylene 42.74 42.80 38.00 48.30 60.18 71.87 41% 68%
3902 Polymers of Propylene 39.96 35.75 32.32 43.09 60.42 72.20 51% 102%
3903 Polymers of Styrene 51.28 39.48 48.37 56.09 65.18 77.68 27% 97%
30.00
40.00
50.00
60.00
70.00
80.00
90.00
Price
/kg
Customs Declared Weighted Ave. Unit Price of Plastic Resins, Jan 2013 - June 2014
3901
3902
3903
Reform PeriodPre-ReformPeriod
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Gains from Customs Reform: Valuations of iron and steel
(HS 7209-13) improved by up to 56% YoY in 2Q 2014
15.00
17.00
19.00
21.00
23.00
25.00
27.00
29.00
31.00
2013 Q1 2013 Q2 2013 Q3 2013 Q4 2014 Q1 2014 Q2
Price
/kg
Customs Declared Weighted Ave. Unit Prices of Iron and Steel, 2013 Q1 - 2014 Q2
72097211
7213
Reform PeriodPre-ReformPeriod
Pre-Reform Reform Period Growth
HS Code 4Digit Description 2013 Q1 2013 Q2 2013 Q3 2013 Q4 2014 Q1 2014 Q2
2014 Q1
YoY
2014 Q2
YoY
7209 Cold-rolled iron or non-alloy steel 26.63 28.10 26.97 27.22 29.38 28.63 10% 2%
7211 Rolled iron or non-alloy steel, not plated 16.06 17.91 20.42 21.15 22.74 27.87 42% 56%
7213
Iron/steel bars and rods, hot-rolled, in
irregularly wound coils 15.71 19.49 18.78 17.13 24.63 25.74 57% 32%
Price movements of plastic resins (3901 3) and
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Period 3901 3902 3903 7209 7211 7212 7213Jan-13 48.75 42.83 61.31 26.26 16.34 42.84 17.38
Feb-13 48.35 45.76 57.46 26.95 42.01 44.43 30.15
Mar-13 36.33 34.34 45.45 26.57 14.95 27.20 13.90
Apr-13 42.15 33.82 35.97 27.68 17.85 32.18 15.17
May-13 44.04 34.06 42.85 28.06 13.58 30.31 27.45
Jun-13 42.24 39.99 38.19 28.68 24.88 43.15 28.06Jul-13 37.49 30.13 43.63 27.50 16.81 42.27 20.32
Aug-13 35.77 31.58 46.67 26.77 20.29 30.72 28.02
Sep-13 40.61 35.65 57.18 26.57 22.92 40.29 15.01
Oct-13 43.07 38.48 51.05 26.93 20.00 40.27 19.84
Nov-13 49.49 44.71 62.28 26.40 24.03 34.86 19.66
Dec-13 58.32 56.40 63.73 28.44 25.81 53.66 16.01Jan-14 56.32 54.40 56.37 28.24 20.89 42.70 25.59
Feb-14 54.06 52.71 62.73 29.87 26.37 29.97 29.89
Mar-14 71.90 71.81 74.93 29.97 23.24 39.26 24.46
Apr-14 71.76 71.85 77.59 29.39 27.99 32.96 26.10
May-14 71.88 71.93 78.75 28.43 26.39 33.15 25.91
Jun-14 71.97 73.14 76.76 27.83 28.19 40.88 24.96
Price movements of plastic resins (3901-3) and
iron and steel (7209-13) from Jan 2013 to June
2014
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Examples of Ridiculous Tax Payments
Income and Other Taxes Due on Some Professionals: 2013
PROFESSION
Income/Sales
Declared
Tax Due
Income Tax Others
1 DOCTOR 149,140.00 1,461.00 2,000.00
2 DOCTOR 139,665.00 3,015.00 2,000.00
3 DOCTOR 146,700.00 3,343.00
4 LAWYER 156,398.00 2,380.00
5 LAWYER 600,000.00 739.00
6 ACCOUNTANT 7,790,370.00 41,761.00
7 ACCOUNTANT 466,742.00 11,835.00
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