CREDIT RATING AGENCIES EYE RP TAX PROGRAM
MANILA, JUNE 23, 2006 (STAR) By Des Ferriols - Credit rating agencies have shifted their attention to the ability of the Arroyo administration to implement the expanded value-added tax (EVAT) program and generate the revenues it promised.
Moody’s Investor Service is expected to come out with the results of this year’s credit ratings review but monetary officials said an upgrade, at least in the ratings outlook, would require definitive indications that the revenue flow would be sustained.
Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. said there are no indication of Moody’s reading of the country’s credit rating prospects but said the review team had specific concerns.
"There’s no word from them yet but an upgrade will depend on two major factors that they were really concerned with," Tetangco said.
According to Tetangco, Moody’s was still looking at the Arroyo administration’s fiscal performance, specifically in reference to its P125-billion deficit target for 2006.
Aside from this, however, the credit rating agency was also increasingly watchful of the government’s ability to implement the EVAT.
"The VAT collections will assure them that the tax reform program is sustainable," Tetangco said. "People want to see not just the increase in tax rate but also an increase in collection efficiency."
Otherwise, Tetangco said Moody’s concern was that inefficiencies in the tax collection would only eat into the incremental revenues coming from the increase in the tax burden of the public.
"Then the whole exercise would have been a waste," Tetangco said. The Bureau of Internal Revenue (BIR), however, is having difficulties meeting its own revenue targets despite the relative success of its VAT collections.
The Department of Finance (DOF) said last week that its VAT collections reached P23.7 billion in January to April, exceeding the four-month target by P6.6 billion.
However, the overall performance of the BIR was dampened by the sudden surge in tax claims that ate into the bureau’s income tax collection and made it miss its April target for the first time.
Although the BIR failed to meet its overall target in April, the DOF said the EVAT returns alone yielded higher-than-expected revenues during the first four months of the year.
The EVAT collections of the BIR reached P8.3 billion, exceeding its target by a hefty P6.1 billion while the BOC collected P15.4 billion, or P574 million higher than its programmed P14.8 billion net revenues.
Finance Undersecretary Gil Beltran said the BIR RVAT was boosted by lower offsets of input VAT claims by VATable entities (P1.2 billion lower) and higher collections from non-VAT reforms (higher by P0.4 billion).
Chief News Editor: Sol Jose Vanzi
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