GOCCs want more share of their profits

Some government owned and controlled corporations (GOCCs) are asking the National Government (NG) to allow them to keep more of their profits instead of remitting half as required by law.

The Department of Finance (DOF) said over the weekend that GOCCs that actually generate profits want to be able to plow back some of the money into their capital instead of remitting them as dividends.

Finance officials said the government was considering these requests but only on a case-to-case basis since the government also depended on these dividends to alleviate its own budget problems.

Finance Undersecretary Nieves Osorio told reporters that the government was expecting a total of P7 billion in dividends from GOCCs this year, up from about P5.3 billion in 2004.

Under the law, GOCCs are required to remit 50 percent of their profits at the end of every year. The government, in turn, accepts either cash dividends or substitutes but only unencumbered properties were allowable as dividend substitutes.

Osorio said the NG normally allows certain GOCCs to remit less than what they are supposed to, but only after their financial records have been evaluated to determine whether they need their funds more than the NG.

Last year, Osorio said the Development Bank of the Philippines remitted the biggest chunk to the NG, amounting to P750 million; followed by the Land Bank of the Philippines which remitted P600 billion.

In 2005, however, Osorio said a lot of GOCCs would lose their exemptions from net income tax and the value-added tax so the finances of state-controlled corporations will change.

The DOF has been tightening its reins on GOCCs, wanting to acquire authority over their budget programming in an effort to contain the consolidated public sector deficit within target levels.

GOCCs are expected to generate a total financing deficit of about P42.5 billion this year, down from P90.7 billion last year.

According to Finance Secretary Cesar V. Purisima, however, the DOF would like to have a formal and standardized mechanism where the department would be able to participate in the budget programming of government corporations.

"If these corporations are going to generate deficits that the NG will have to fund, we want to have a say in it," Purisima told reporters. "Right now, it’s very loose and informal. I want a more structured and deliberate process."

Purisima compared the process to a parent company of a private conglomerate with a number of subsidiaries. "The NG will be like the parent company of these GOCCs," he said. "Of course the GOCCs will retain the same degree of autonomy but we will have a say in their budget programming."

According to Purisima, the new policy would be contained in an executive order that would henceforth apply to all GOCCs.

The financing deficit of GOCCs ultimately impact the CPSD which Purisima said should fall to 2.5 percent of gross domestic product (GDP) this year, a revised target that accelerated the 4.8 percent target originally set for 2005.

In 2004, the DOF reported that GOCCs, particularly the 14 monitored non-financial government corporations (MNFGCs) were expected to generate a total of P125 billion in financing deficit but the actual amount was lower at P90.7 billion.

GOCCs with financing deficit, Osorio explained, are ultimately funded by the NG out of the national budget. "There are cases where the NG has to give outright subsidy as in the case of the NFA and there are cases where we have to give equity subsidy," she said.

On the other hand, Osorio said the National Government was expecting total dividends from GOCCs to grow from P5.3 billion in 2004 to P7 billion this year.

Osorio said GOCCs are already required to submit their corporate operating budget beginning this month to tighten the DOF’s monitoring of their expenditures and developing financing gap.