Not so positive economic news

According to the Institute for Development and Econometric Analysis, Inc. (IDEA), data from the finance department showed that income tax collections fell by 11% year-on-year in October 2009. Undersecretary Gil Beltran blames the decline on the Reformed Value Added Tax of 2005 and Republic Act 9504 or the tax relief law. The tax relief law exempts minimum wage earners from paying income taxes, at the same time raising exemptions of individuals and dependents, while the Reformed Value Added Tax of 2005 reduced corporate taxes to 30% from the previous 35%.

Global banking giant, HSBC estimates that the government will fall short in its 2010 budget by more than P370 billion, while US based GlobalSource predicts that the deficit will hit P316 billion, or 3.8% of the country’s gross domestic product (GDP). Economists believe that such shortfall will ensue because of persistent revenue erosion and weak growth, especially since an election year is accompanied by uncertainty.

Furthermore, an estimated P9 billion in revenues will be lost by the Philippine government after the implementation of free trade agreements with other ASEAN countries, China, New Zealand and Australia. However, Finance Secretary Margarito Teves believes that the said revenue loss will be compensated by the increase in the transfer of goods into the country.

Moreover, the annual Labor and Employment Status report of the National Statistics Office recorded 9.523 million Filipinos who were unemployed or underemployed in 2009, up from the preceding year’s 9.294-million level. The unemployment rate increased by 0.1% to 7.5%, translating to 2.831 million jobless Filipinos. The underemployment rate, on the other hand, went down to 9.1% from last year’s 9.3

Likewise, in its attempt to promote renewable energy projects, the Energy Regulatory Commission plans to include an additional component in electric bills, named the Renewable Energy Charge (REC). Consumers will bear the said cost, even if their electricity did not come from a renewable source. The REC is intended to fund the feed-in tariff system entitled to renewable energy developers.

Also, according to Board of Investments Chief Elmer Hernandez, the 10% growth target in investment pledges projected for this year might not be enough to bring back the level in 2008. An 83% drop in investment pledges was recorded year on year as of September 2009.

Lastly, according to same published report of IDEA, Pricewaterhouse Coopers reported that incentive programs of some emerging offshore destinations such as China, Eastern Europe and Latin America may soon hurt the growth of the Philippine business process outsourcing industry. The country may find difficulty in coping with the said threat, as current laws restrict incentives that the Department of Trade and Industry can offer to investors.

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