NG posts P3-B budget surplus in Aug

The National Government (NG) posted a budget surplus of nearly P3 billion in August, preliminary data from the Department of Finance (DOF) showed yesterday.

Government revenue exceeded public spending in April for the first time in four years and last month’s surplus was the third this year.

National Treasurer Omar Cruz said the full-year deficit may be P41 billion less than the P180-billion official forecast.

Analysts said improving finances may help the Philippines secure better terms on a planned $850-million global bond sale this year.

Finance Secretary Margarito Teves will hold meetings in the US this month with rating companies, which have called for tax changes before they consider raising the country’s junk debt ratings.

"This is a good time now for the Philippines to issue bonds abroad because of the string of good news, particularly on the budget surplus," said Pamela Colocado, who helps manage about P140 billion at the Bank of the Philippine Islands (BPI).

Teves said for the month of August alone, the government’s revenue generating agencies recorded a net surplus of P10.5 billion.

In particular, the BIR reported an impressive collection of P55.089 billion in August, surpassing its target of P51.763 billion by P3.326 billion and representing a record growth of 27.73 percent against a year ago level.

Finance Undersecretary Emmanuel Bonoan said the bulk of the BIR’s surplus this year came from tax collections from the provinces and the large taxpayers service (LTS).

Bonoan also attributed BIR’s favorable performance to an increase in collections from capital gains tax and overall efficiency on tax collection.

Teves said he is optimistic that they would sustain this better performance for the rest of the year especially with the decision of the Supreme Court (SC) to uphold the constitutionality of the expanded value-added tax (EVAT).

"Taken as a group, we are still ahead but if we are going to zero in on the BOC and BIR’s collection even if we proceed with the EVAT, we will still have a shortfall. One factor is the expenditure side, we have to see how far or close are we in hitting our program deficit," Teves said.

Tax Increase

The Supreme Court on Thursday ended the suspension of a law expanding the coverage of the sales tax to include electricity and imported oil.

The law, which will also raise the value-added- tax rate to 12 percent from 10 percent at the start of next year, was put on hold by the court in July after petitions were filed saying it was unconstitutional.

The suspension prompted Moody’s Investors Service, Standard & Poor’s and Fitch Ratings to all lower the outlooks on their Philippine ratings that month.

"The lifting of the restraining order should be very positive for the ratings," Cruz said. "It’s a definite step toward undoing what they did in July."

Teves, who spoke today in a separate interview, said the government plans to implement the value-added-tax law Oct. 1 and the change should boost revenue by as much as P15 billion this year. Tax revenue in August amounted to P55 billion, six percent more than the government’s goal for the month, he said.

Mrs Arroyo has said she aims to balance the budget by the end of her term in 2010, partly by raising taxes. Interest payments on the national debt swallow a third of the government’s annual budget, leaving less to spend on roads, bridges and other infrastructure that would help the economy.

Deficits since 1998 caused the national debt to almost triple to P3.9 trillion since 1997, when the government last had a budget surplus. The shortfall shrank 26 percent from a year earlier to 82.6 billion pesos in the first seven months of 2005.