BIR says P460-B target for 2003 unrealistic

The Arroyo administration expects to collect P460 billion in taxes next year but the Bureau of Internal Revenue is appealing for a "more realistic" target that will not raise false expectations.

The administration’s 2003 revenue target would be at least three percent more than this year’s revenue target of P447 billion.

According to BIR Commission Rene Bañez, however, the 2002 revenue target is unrealistic to begin with and government should use a better revenue targeting model for 2003.

According to Bañez, tax revenue target setting should be a scientific process not influenced by political pressure but instead based on credible assumptions that would reliably predict the revenues that could be generated from various economic activities.

Bañez has been lobbying for the administration to shift its approach to setting its annual revenue goals since he assumed office.

In a letter written to the Development Budget Coordinating Committee (DBCC), Bañez said the present method of forecasting tended to be distorted by external pressure. He said the government, in the past, has "succeeded in pleasing" the International Monetary Fund (IMF) by raising the revenue targets "extremely high" just to meet the programmed deficit for the year.

Controlling the deficit, according to Bañez, was of prime importance to the IMF since this would help bring down the spread on Philippine bonds. "In other words, the lower the programmed deficit, the lower the interest cost of the country’s foreign borrowing," he said.

"The BIR’s own experience with target setting at the DBCC last year was strikingly similar," Bañez said. "During the deliberations of the bureau’s goal for 2002, DBCC started out with the desired revenue program and worked backwards, eventually setting a revenue goal that met the desired level of spending."

According to Bañez, the government had historically started out with a programmed budget deficit as agreed with the IMF and a desired level of spending for pump-priming purposes. "The desired revenues become the residual or balancing factor," he said. "That is, if the government feels it necessary to spend more than in order to maintain the deficit, forecast revenues are increased accordingly sometimes to unrealistic levels," he said.

The BIR, however, has bigger problems than methodology. The bureau has been tagged as the main culprit for revenue leaks, losing at least 46 percent of its expected revenues from inefficiency, graft and corruption. – Des Ferriols