Bringing the “Public” back into “Public Finance” Ronald U. Mendoza, Ph.D.

1. Bringing the “Public” back into “Public Finance” Ronald U. Mendoza, Ph.D. Associate Professor of Economics

2. BRINGING THE “PUBLIC” BACK INTO “PUBLIC FINANCE” EFFICIENCY + TRANSPARENCY = ACCOUNTABILITY

3. BOC: DEVELOPMENTAL AGENCY?

4. EXAMPLE: KUMPIT TRADE IN THE SOUTH • Annual income of up to P132M (Tawi-Tawi) and P396M (Sulu), or a total of P528M, from cross-border illicit trade • This shadow economy constitutes 0.52% of the ARMM economy (measured by GRDP). • Nationally, between 2002 and 2011, the government lost an estimated P1.3 trillion in taxes and duties due to smuggling. Source: Villanueva (2013)

5. BOC: DEVELOPMENTAL AGENCY?

6. BOC: DEVELOPMENTAL AGENCY? Net Sincerity Ratings in Fighting Corruption (Selected Agencies)

7. BOC: DEVELOPMENTAL AGENCY? Composition of BOC Collections

8. BOC: DEVELOPMENTAL AGENCY? Share of BOC Revenues in Total Government Revenues

9. 40 CENTAVOS OUT OF EVERY 1 PESO REVENUE LOST An Illustration of the Growing Gap Between Actual Total Revenue and Potential Total Revenue

10. BOC: DEVELOPMENTAL AGENCY? Revenue Loss from Trade Misinvoicing Juxtaposed Against 2015 Public Spending

11. BOC: DEVELOPMENTAL AGENCY? Revenue Loss from Trade Misinvoicing (in % of actual total BOC revenues)

12. INCREASING TRANSPARENCY AND ACCOUNTABILITY • Transparency in key information on BOC operations • “Crowd-sourcing” data gathering, fact-checking, and analytical inputs • “Third-party monitor” serving as “demand side” for sustaining reforms

13. BUDGET AND SPENDING REFORMS

14. BUDGET AND SPENDING REFORMS • Results-based Budgeting • Open Government Initiative • Grassroots Participatory Budgeting • Performance-Informed Budgeting • Additional proposals: • District Development Councils • People’s Fund • EITI

15. RESULTS-BASED BUDGETING • Medium-Term Expenditure Framework (MTEF, 2007) • Organizational Performance Indicator Framework (OPIF, 2007) • Zero-Based Budgeting (ZBB)/ Program Evaluation (2010) • Results-Based Performance Management System (RBPMS) • Performance-Based Incentive System (PBIS)

16. OPEN GOVERNMENT INITIATIVE National Government Expenditures, Obligation Basis, By Sector (2013)

17. GRASSROOTS PARTICIPATORY BUDGETING Fiscal Year 2015 Grassroots Participatory Budgeting (PHP billions) 1,590 local government units involved Total Amount = PHP 20.9 billion (0.8% of proposed 2015 budget)

19. PERFORMANCE-INFORMED BUDGETING Example: PNP Indicators and Targets in the GAA 2014

20. PERFORMANCE-INFORMED BUDGETING Example: DSWD Indicators and Targets in the GAA 2014

21. PERFORMANCE-INFORMED BUDGETING Example: DOST Indicators and Targets in the GAA 2014

22. WHY BRING THE “PUBLIC” BACK INTO “PUBLIC FINANCE”? EFFICIENCY + TRANSPARENCY = ACCOUNTABILITY

23. Comments welcome at POLICYCENTER@AIM.EDU.

24. IMPROVING EQUITY IN TAX POLICY

25. IMPROVING EQUITY IN TAX POLICY Tax Rates for ASEAN Countries

26. IMPROVING EQUITY IN TAX POLICY • 5.7M taxpayers paid their income taxes in 2012. • Of which, around 17% falls under the middle class (P64,317 – P787,572 annual income) Source: Virola et. Al (2013). Will the Recent Robust Economic Growth Create a Burgeoning Middle Class...” Bureau of Internal (Revenue Data on Income Tax Filers 2012), Bureau of Treasury

27. IMPROVING EQUITY IN TAX POLICY Source: Virola et. Al (2013). AIM Policy Center calculations using BIR data • Total income tax revenues comprises 15% of total government revenues collected

28. IMPROVING EQUITY IN TAX POLICY Estimated Tax Revenues from Existing Tax Regime and Tax Proposals

29. CITIZCAN: DEMAND SIDE OF BOC REFORMS