Press Release
February 22, 2008

Weak revenue collection deters improvement in RP fiscal position- Angara

Senator Edgardo Angara today expressed alarm over the continued weak revenue stream of the government, arguing that this is the main factor deterring the country's fiscal position from improving.

"Standard & Poor has rightly pointed out that the government's collection and tax administration should be a cause of concern for our fiscal situation," said Angara.

"Our percentage of tax in Gross Domestic Product (GDP) is very low compared to the levels in Southeast Asia. The country's share of tax to GDP is 14.3%, while the Southeast Asian average is at 16.2%. Neighboring countries such as Malaysia have 18 % of tax share in its GDP," said Angara.

Chair of the Senate Committee on Banks and Financial Institutions, Angara lamented that "for 2007, fiscal reforms have been at a standstill, simply because an unimaginative Department of Finance took the easy way out by selling the state's prized assets."

"The government accumulated a Php 9.4 billion deficit, lower than the expected Php 53.6 billion because government assets worth Php 90 billion were sold," he said.

"This sale has muted the government's poor revenue collections. Yearly, the government is leaking Php60 to 65 billion worth of revenue from technical smuggling, and another estimated Php60 to 65 billion is lost to the inefficiency of VAT collection," Angara pointed out.

To increase tax collection, Angara said the government should take concrete actions in reducing smuggling and tax evasion.

"That should be the initial effort. We should start targeting tax collection to at least the Southeast Asian average, which is 16.2% of GDP," he said.

To achieve this, our fiscal position must improve and stabilize, and we can do that by pushing and building up the capital market and strengthen the financial system. By strengthening the financial system, capital markets are built up, and more businesses will thrive, thereby broadening the government's tax revenue base." Angara said.

For 2008, the Senate Committee on banks and financial institutions intends to push for such financial reforms, such as a Pre-Need Code, a Corporate Recovery Act, and a Real Estate Investment Trust (REIT) Act, among several.

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