APRIL BUDGET SURPLUS OF P17.6 BILLION BIGGEST IN 9 YEARS
MANILA, MAY 18, 2006 (STAR) By Des Ferriols - The country posted a budget surplus of P17.6 billion in April, the biggest in nine years and a dramatic 428-percent increase from the P3.3-billion surplus recorded in the same period last year, thanks to higher revenue collections and lower expenses.
The Department of Finance (DOF) said yesterday the April figure brought the budget deficit for the first four months of the year to P50 billion, a 16.9-percent improvement over the P60.1-billion deficit recorded in the same period last year.
"Disbursements were so much more controlled in April. Our cash position remains very strong (so) we will spend more in May and June," National Treasurer Omar Cruz said yesterday.
The April budget surplus was the highest since April 1997ís P18 billion. It was also the first time that revenue exceeded spending since September 2005.
The budget surplus "shows the governmentís efforts to address the fiscal problem is on track,"said Luz Lorenzo, an economist at ATR-Kim Eng Capital Partners. "The thing that most investors are looking at this year is the implementation of fiscal reforms, thatís why they are closely watching the monthly numbers."
April is the annual deadline for filing of corporate and income tax returns and for that month alone, the DOF reported that the collections of the Bureau of Internal Revenue (BIR) reached P71.4 billion.
The amount is 13 percent higher than last yearís collection of P62.9 billion but P7.4 billion short of the April target set by the DOF.
According to Finance Secretary Margarito B. Teves, however, there was an unexpected increase in the utilization of tax credit certificates (TCCs) in April to offset income tax payments at the end of the fiscal year.
Teves characterized the increase in TCC use as "significant" and admitted the government was at a loss as to exactly how much TCCs were in circulation that could potentially erode future income tax collections.
Nevertheless, Teves said there was still a surplus in April largely due to the decline in spending as the Arroyo administration continued to use the 2005 reenacted budget.
Actual disbursement, according to Teves, reached only P77.4 million, seven percent lower than the same period last year when total spending amounted to P83.4 million.
Total revenues, on the other hand, were 16.1 percent higher than last year, amounting to P300 billion compared to P258.4 billion over the same four-month period in 2005.
On the other hand, total spending amounted to P350 billion for the first four months, up 9.9 percent compared to last yearís P318.5 billion. Teves said that aside from the slowdown in spending, interest expense was also significantly lower this year at P24.7 billion for April alone, compared to last yearís P26.9 billion.
According to Teves, the government is expecting a surge in its public spending in May and June as the Arroyo administration embarks on its pump priming activities.
"We will be spending a lot more in the next two months so we have to make up for the shortfall of the BIR this month and make sure we do not repeat the same thing next month," Teves said. "We will have to push this from the revenue-site because we can not sacrifice growth by cutting further back on our spending."
Teves said the DOF intends to rationalize the use of TCCs for the rest of the year and taxpayers who declared huge declines in gross receipts and income would be audited by the BIR.
Teves said the DOF also intends to intensify its campaign against tax evasion including a crackdown on professionals for unethical practices.
"With these measures, we are confident we will be able to meet the goal of narrowing the budget deficit to P125 billion this year and achieving a balanced budget by 2008," he said. ĖWith AFP
Teves explains P7.4-B shortfall in BIRís April tax collection By Des Ferriols The Philippine Star 05/18/2006
The unexpected increase in the utilization of tax credit certificates (TCCs) as well as the early remittance of income taxes withheld caused the P7.4-billion shortfall in revenue collections in April.
Historically the strongest revenue month for the Bureau of Internal Revenue (BIR), April turned out to be a surprise for finance officials who admitted they had no idea of the stock of TCCs held by corporations and whether their utilization could cause unpredictable fiscal problems in the future.
The Department of Finance (DOF) reported that the collections of the Bureau of Internal Revenue (BIR) reached P71.4 billion in April, 13 percent higher than last yearís collection of P62.9 billion, but P7.4 billion short of the April target set by the DOF.
Corporate income taxes alone are expected to surge this year as the government raised the tax rate from 32 percent to 35 percent.
On top of the rate increase, corporate income also surged as a result of increased consumer spending. Both factors were used as basis for the April target.
Finance Secretary Margarito B. Teves, however, admitted that the Department of Finance did not anticipate the surge in the TCC utilization in April and the department also did not have the inkling of how many TCCs were circulating that could still be utilized.
Teves was also scheduled to meet with the credit rating evaluation team from Standard & Poors which started its annual review this week.
During this meeting, he is expected to explain what could be a kink in the Arroyo administrationís fiscal consolidation efforts.
TCCs are certificates issued by the BIR and other government agencies implementing a myriad of tax incentives. Companies that hold TCCs could use the certificates to offset any taxes they have to pay, whenever they want to do so.
In April, Teves said the BIR attributed its failure to meet its collection target to the sudden increase in the utilization of TCCs and creditable withholding tax certificates.
"I have to be candid and the truth of the matter is we still need to know the stock of TCCs that are floating out there, how they are allocated and how much could still be used to offset tax payments in the future," Teves said.
Since the government did not have a full and central accounting of TCCs issued by various implementing agencies, Teves admitted that it added unpredictability to actual revenue collections particularly on the corporate income tax side of BIR collections.
"We canít say if this is a one-time event because we have not determined how the TCCs are broken down," he said. "We cant say if this will be a recurring problem."
The BIRís Large Taxpayers Service (LTS) said the use of TCCs for offsetting income taxpayments surged by as much as P200 million in April alone and there was also an increase in the use of creditable withholding tax.
LTS officer-in-charge Merlinda Orboyo told reporters that the BIR has been campaigning for corporations to remit the taxes they have withheld and for 2005 alone, she said the creditable withholding tax increased by P8 billion.
"That alone can explain the bulk of the shortfall," Orboyo said. "That is actually taxes that we have already collected that would have fallen and booked in April since it is the deadline for income taxes."
"But because we succeeded in getting these companies to remit the withholding tax early, the usual bulk that comes in April was not as large," she went on to explain. "In a way, our success worked against us this time, if only in terms of expectations that our collections would go up by so much in April."
Chief News Editor: Sol Jose Vanzi
© Copyright, 2006
by PHILIPPINE HEADLINE NEWS ONLINE
All rights reserved
PHILIPPINE HEADLINE NEWS ONLINE [PHNO] WEBSITE