MEDIUMTERM FISCAL PROGRAM Secretary Emilia T Boncodin Department

MEDIUM-TERM FISCAL PROGRAM Secretary Emilia T. Boncodin Department of Budget and Management Cabinet Presentation August 31, 2004

POLICY OBJECTIVES q Balance the national government budget in 6 years q Reduce CPSD to GDP ratio to 3% in 6 years q Reduce Public Sector Debt to GDP ratio to 90% in 6 years

National Government Fiscal Position 1986 -2004 (Percent of GDP) Aquino Ramos Estrada Arroyo

National Government Deficit 1986 -2004 (percent of GDP) Aquino Ramos Estrada Arroyo

Consolidated Public Sector Financial Position, 1986 -2004 P billion % of GDP Aquino Ramos Estrada Arroyo

PUBLIC SECTOR DEBT TO GDP RATIO Source: BTr, NSCB * As of Sept. 2003

ACTION PLAN

Deficit Targets, 2004 -2010 (Percent of GDP)

Debt Targets, 2003 -2010 (percent of GDP)

SPECIFIC MEASURES: National Government

REVENUE PROGRAM

NG REVENUES, 1986 -2004 (percent of GDP)

TAX REVENUES, 1986 -2004 Ratio to GDP

REVENUE TARGETS, 2004 -2010 (percent of GDP) New Tax Measures Admin. Measures

NG REVENUES, 2004 -2010 (Percent of GDP)

TAX REVENUES, 2004 -2010 (Percent of GDP)

ACTION PLAN: Revenues A. Improving Administrative Efficiency 1. Periodic adjustment of fees and charges 2. Improve enforcement mechanisms to increase collection efficiency: BIR: Computerization/Automation of operating system; Enhancement of Audit Program; Intensified enforcement procedures; Conduct taxpayer compliance verification drive. BOC: Modernization of information systems and technology; Create Task Force Anti-Smuggling; Strengthening of Internal Audit Service; Purchase of Container X-rays for ports

ACTION PLAN: Revenues B. Proposed Legislative Measures 1. Gross income tax system for corporation and self employed 2. Indexation of the excise tax on sin products 3. Increase excise tax on petroleum products 4. Rationalize fiscal incentives Php B 16. 8 7. 0 29. 7 5. 0

ACTION PLAN: Revenues Php B 5. 6. 7. 8. General Tax Amnesty with Submission of SAL Lateral Attrition System Franchise Tax on Telecommunications to replace VAT Two-Step Increase in the VAT rate na na 5. 0 19. 9

EXPENDITURES

NG Expenditures to GDP, Philippines Source: DBM

BUDGET FLEXIBILITY MARGINS 2004 1997 1992

Personal Services, Selected Asian Countries (Percent of GDP)

Personal Services, Selected Asian Countries (Percent of Tax Collections)

Capital Outlays, Selected Asian Countries (Percent of GDP)

Expenditure Targets, 2004 -2010 (Percent of GDP)

ACTION PLAN: Expenditures Administrative Measures A. Issuance of Economy Measures ü Administrative Order to be issued by PGMA directing cost-reduction program on utilities, supplies, travel, etc.

Action Plan…Administrative: Expenditures B. Rationalization of Personal Services 1. Objectives ü ü ü Deactivation of functions no longer relevant Consolidation/rationalization of duplicating functions Strengthening of important functions 2. Mechanics ü Voluntary but time-bound separation opportunity but with option to (1) remain in government service; or (2) be separated with incentives

Action Plan…Administrative: Expenditures C. Improvement of Management and Control of GOCCs ü EO to improve governance of GOCCs/Other Government Corporate Entities (OGCEs) v v Improve operational responsibility of supervising departments/agencies over GOCCs/OGCEs attached to them Impose moratorium on establishment of subsidiary GOCCs pending assessment of operations of all subsidiary GOCCs

Action Plan. . . Administrative: Expenditures D. Fully implement devolution provision of the LGU Code ü MFC to be primary conduit for funds (except IRA and mandated shares to LGUs) E. Increase social safety net program within the budget F. Transfer to the General Fund of all balances of dormant accounts

ACTION PLAN: Expenditures Legislative Measures A. Enactment of Fiscal Responsibility Bill ü ü Reduce public debt to more manageable levels by imposing debt cap No new expenditure without new revenue measure B. Enactment of Omnibus Re-engineering Law seeking authority for President to reorganize Executive Branch, including GOCCs, and offer appropriate incentives

Action Plan. . . Legislative: Expenditures C. Rationalize government retirement and pension schemes ü ü ü Suspend RA 1616: All retirement paid by GSIS Select veterans’ benefits that can be reasonably funded Make pension benefits commensurate to premium contributions

Military Pension vs. Regular Military Compensation (in billion pesos)

Action Plan. . . Legislative: Expenditures D. Rationalize government compensation system ü ü ü Simplify position classification Improve compensation for highly competitive posts Simplify compensation structure and implement performance-based compensation system E. Remove automatic guarantee provisions in certain GOCCs

DEBT MANAGEMENT

NG DEBT, 1986 -2004 (percent to GDP)

NG Debt Targets, 2004 -2010 (percent to GDP)

ACTION PLAN: Debt Management A. Implement a debt reduction plan 1. Bond exchange to lengthen debt maturity 2. Make more use of ODAs than commercial borrowings 3. Limit guarantees to GOCCs