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MEDIUM-TERM FISCAL PROGRAM. Secretary Emilia T. Boncodin Department of Budget and Management Cabinet Presentation August 31, 2004. POLICY OBJECTIVES. Balance the national government budget in 6 years Reduce CPSD to GDP ratio to 3% in 6 years
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MEDIUM-TERM FISCAL PROGRAM Secretary Emilia T. Boncodin Department of Budget and Management Cabinet Presentation August 31, 2004
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
National Government Fiscal Position 1986-2004 (Percent of GDP) Aquino Ramos Estrada Arroyo
National Government Deficit 1986-2004 (percent of GDP) Aquino Ramos Estrada Arroyo
Consolidated Public Sector Financial Position, 1986 -2004 P billion % of GDP Aquino Ramos Estrada Arroyo
PUBLIC SECTOR DEBT TO GDP RATIO * As of Sept. 2003 Source: BTr, NSCB
REVENUE TARGETS, 2004-2010(percent of GDP) New Tax Measures Admin. Measures
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
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
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
NG Expenditures to GDP, Philippines Source: DBM
BUDGET FLEXIBILITY MARGINS 2004 1997 1992
Personal Services, Selected Asian Countries (Percent of Tax Collections)
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.
Action Plan…Administrative: 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
Action Plan…Administrative: 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
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
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 • Enactment of Omnibus Re-engineering Law seeking authority for President to reorganize Executive Branch, including GOCCs, and offer appropriate incentives
Action Plan...Legislative: Expenditures • 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
Military Pension vs. Regular Military Compensation(in billion pesos)
Action Plan...Legislative: Expenditures • Rationalize government compensation system • Simplify position classification • Improve compensation for highly competitive posts • Simplify compensation structure and implement performance-based compensation system • Remove automatic guarantee provisions in certain GOCCs
ACTION PLAN:Debt Management • Implement a debt reduction plan • Bond exchange to lengthen debt maturity • Make more use of ODAs than commercial borrowings • Limit guarantees to GOCCs