PHILIPPINE FISCAL POLICY
What
is Fiscal Policy?
Fiscal Policy refers to the "measures employed by governments to stabilize the economy, specific ally by manipulating the levels and allocations of taxes and governmen t expenditures. Fiscal Policy in the Philippines is char acterized by continuous and increasing levels of debt and budget deficits, though there have been improvemen ts in the last few years. Fiscal measures are frequently used in tandem with monetary policy to achieve cer ta tain goals.
Revenues and
Funding
The Philippine government gener at ates revenues through mainly through personal and income tax collection, but a small por tion of non-tax revenue is also collected through fees and licenses, privatization proceeds and income from other government oper at ations and state-owned enterprises.
Tax Revenue
Tax revenue is the income that is gained by governments through taxation. Tax collections comprise the biggest percentage of revenue collected. Tax effor t as a percentage of GDP has aver aged at roughly 13% for the years 2001-2010.
Income Taxes
Income tax is a tax on a person's income, wages, profits arising from proper ty, pr actice of profession, conduct of tr ade or business. (Tax code of 1997) Income tax in the Philippines is a progressive tax, as people with higher incomes pay more than people with lower incomes.
Annual Taxable Income
Income Tax Rate
Less than P10,000
5%
Over P10,000 but not over P30,000
P500 + 10% of th e excess over P10,000
Over P30,000 but not over P70,000
t he excess over P30,000 P2,500 + 15% of th
Over P70,000 but not over P140,000
the excess over P70,000 P8,500 + 20% of th
Over P140,000 bu t not over P250,000
P22,500 + 25% of th the excess over P140,000
Over P250,000 bu t not over P500,000
P50,000 + 30% of th the excess over P250,000
Over P500,000
P125,000 + 34% of th e excess over P500,000
Extended Value Added Tax (EVAT) form of sales tax that is imposed on the sale of goods and services and on the impor t of goods into the Philippines.
a
The current E-VAT r at ate is 12% of tr ansactions.
Tariffs and Duties
Imposes tariffs and duties on all items impor ted into the Philippines. According to Executive Order 206, returning residents, Overseas Filipino Workers (OFW¶s) and former Fi lipino citizens are exempted from paying duties and tariffs.
Non-Tax Revenue
Bureau of Treasury
The Bureau of Treasury (BTr) manages the finances of the government, by attempting to maximize revenue collected and minimize spending. The bulk of non-tax revenues comes from the BTr ¶s inc income ome.. Unde Underr Executive Order No.449, the BTr collects revenue by issuing, servicing and redeeming government securities, and by controlling the Securities Stabilization Fund
Privatization
Incidence or process of tr ansferring ownership of a business, enterprise, agency or public service from the public sector to the private sector or to private non-profit organizations.
PAGCOR
A government-owned corpor at ation established in 1977 to stop illegal casino oper at ations. PAGCOR is mandated to regulate and license gambling gener at ate revenues for the Philippine government through its own casinos and promote tourism in the countr
Financing and Debt External Sources of Financing are: Progr am and Project Loans Credit Facility Loans Zero-coupon Treasury Bills Global Bonds Foreign Currencies
Domestic Sources of Financing are Treasury Bonds Facility loans Treasury Bills Bond Exchanges Promissory Notes Term Deposi D eposi ts
In 2010, the total outstanding debt of the Philippines reached P4.718 trillion: P2.718 trillion from outstanding domestic sources and P2 trillion from foreign sources. According to the Depar tment of Finance, the country has recently reduced dependency on e xternal sources to minimize the risks caused by changes in the global exchange r at ates. Effor ts to reduce national debt include increasing tax effor ts and decreasing government spending.
History of Philippine Fiscal Policy ation was primarily Fiscal policy during the Marcos administr at focused on indirect tax collection and on government spending on ecnomic ecn omic serv service ices s and infr astructure development. T he Aquino administr at ation inherited a large fiscal deficit from the previous administr at ation, but managed to reduce fiscal imbalance and improve tax collection through the introduction of the 1986 Tax Reform Progr am and the Value Added Tax. The Ramos administr at ation experienced budget surpluses due to substantial gains from the m assive sale of government assets and strong foreign investment in its ear ly years. However, the implementation of the 1997 Comprehensive Tax Reform Progr am and the onset of the Asian Financial Crisis resulted to a deterior at ating fiscal position in the succeeding years and administr at ations. The Estr ada administr at ation f aced a large fiscal deficit due to the decrease in tax effor t and the repayment of the Ramos administr at ation¶s debt to contr actors and suppliers. During the Arroyo administr at ation, the Expanded Value Added Tax Law was enacted, national debt-toatio peaked, and unde GDP r at undersp rspend ending ing on pub public infr astructure and other c apital expenditures was observed.
