MEDIUMTERM

1
MEDIUM-TERM FISCAL PROGRAM
Secretary Emilia T. Boncodin Department of Budget
and Management Presentation to GOCCs/GFIs Septembe
r 15, 2004 Heroes Hall, Malacañang
2
POLICY OBJECTIVES

• Balance the national government budget in 6 years
• Reduce CPSD to GDP ratio to 3 in 6 years
• Reduce Public Sector Debt to GDP ratio to 90 in
  6 years

3
National Government Fiscal Position 1986-2004 (Per
cent of GDP)
Aquino
Ramos
Estrada
Arroyo
4
National Government Deficit 1986-2004 (percent of
GDP)
Aquino
Ramos
Estrada
Arroyo
5
GOCCs Deficit (14 MNFGCs) 1986-2004
P billion
Aquino
Ramos
Estrada
Arroyo
6
PUBLIC SECTOR DEBT TO GDP RATIO
As of Sept. 2003
Source BTr, NSCB
7
ACTION PLAN
8
Deficit Targets, 2004-2010(Percent of GDP)
9
Debt Targets, 2003-2010(percent of GDP)
10
SPECIFIC MEASURES
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Measures to Address Fiscal Problem

• 1. National Government
• Revenues
• Expenditures
• Debt Management

• 2. Government-owned and/or Controlled
  Corporations/Government Financial Institutions
• Rate Adjustment
• Rationalization
• Streamlining
• Compensation
• Privatization/Outsourcing
• Debt Guarantee

• 3. Local Government Units
• IRA Adjustment

12
REVENUE PROGRAM
13
NG REVENUES, 1986-2004(percent of GDP)
14
TAX REVENUES,1986-2004 Ratio to GDP
15
NG REVENUES, 2004-2010(Percent of GDP)
16
TAX REVENUES, 2004-2010(Percent of GDP)
17
ACTION PLAN Revenues

• Improving Administrative Efficiency
• Periodic adjustment of fees and charges
• Improve enforcement mechanisms to increase
  collection efficiency
• BIR Computerization/Automation of operating
  system
• Enhancement of Audit Program
• Intensified enforcement procedures
• Conduct taxpayer compliance verification drive.
• BOC Modernization of information systems and
  technology
• Create Task Force Anti-Smuggling
• Strengthening of Internal Audit Service
• Purchase of Container X-rays for ports
• Rate Adjustment

B. Privatization
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ACTION PLAN Revenues

• Proposed Legislative Measures
• Gross income tax system for corporation and self
  employed
• Indexation of the excise tax on sin products
• Increase excise tax on petroleum products
• Rationalize fiscal incentives

16.8
7.0
29.7
5.0
19
ACTION PLAN Revenues

• General Tax Amnesty with Submission of SAL
• Lateral Attrition System
• Franchise Tax on Telecommunications to replace
  VAT
• Two-Step Increase in the VAT rate

na
na
5.0
19.9
20
EXPENDITURES
21
NG Expenditures to GDP, Philippines
Source DBM
22
BUDGET FLEXIBILITY MARGINS
2004
1997
1992
23
Personal Services, Selected Asian
Countries(Percent of GDP)
24
Personal Services, Selected Asian Countries
(Percent of Tax Collections)
25
Capital Outlays, Selected Asian Countries
(Percent of GDP)
26
Expenditure Targets, 2004-2010 (Percent of GDP)
27
ACTION PLAN Expenditures

• Administrative Measures
• A. Issuance of Economy Measures
• Administrative Order to be issued by PGMA
  directing cost-reduction program on utilities,
  supplies, travel, etc.

28
Action PlanAdministrative Expenditures

• Rationalization of Personal Services
• 1. Objectives
• Deactivation of functions no longer relevant
• Consolidation/rationalization of duplicating
  functions
• Strengthening of important functions
• 2. Mechanics
• Voluntary but time-bound separation opportunity
  but with option to (1) remain in government
  service or (2) be separated with incentives

29
Action PlanAdministrative Expenditures

• Improvement of Management and Control of GOCCs
• EO to improve governance of GOCCs/Other
  Government Corporate Entities (OGCEs)
• Improve operational responsibility of supervising
  departments/agencies over GOCCs/OGCEs attached
  to them
• Impose moratorium on establishment of subsidiary
  GOCCs pending assessment of operations of all
  subsidiary GOCCs
• Privatization/Outsourcing

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Action Plan...Administrative Expenditures

• Fully implement devolution provision of the
  LGU Code
• MFC to be primary conduit for funds (except IRA
  and mandated shares to LGUs)
• Increase social safety net program within the
  budget
• Transfer to the General Fund of all balances of
  dormant accounts

31
ACTION PLAN Expenditures

• Legislative Measures
• Enactment of Fiscal Responsibility Bill
• Reduce public debt to more manageable levels by
  imposing debt cap
• No new expenditure without new revenue measure

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Action Plan...Legislative Expenditures

• B. Rationalize government retirement and pension
  schemes
• Suspend RA 1616 All retirement paid by GSIS
• Select veterans benefits that can be reasonably
  funded
• Make pension benefits commensurate to premium
  contributions

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Action Plan...Legislative Expenditures

• C. Rationalize government compensation system
• Simplify position classification
• Simplify compensation structure and implement
  performance-based compensation system
• Rationalize compensation of board members and
  corporate officers

D. Remove automatic guarantee provisions in
certain GOCCs
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DEBT MANAGEMENT
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ACTION PLANDebt Management

• Bond exchange to lengthen debt maturity
• Make more use of ODAs than commercial borrowings
• Debt cap
• Limit borrowings to high priority
• import projects