2015 Budget Dept of Finance DBCC Presentation

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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1

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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6

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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7

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.


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.



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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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Documents

2015 Budget Dept of Finance DBCC Presentation