Aquino Can Meet Philippine Revenue Goal Using Tax Crackdown, Henares Says

Philippine President Benigno Aquino can fulfill a pledge to boost annual government revenue by 150 billion pesos ($3.2 billion) as officials go after tax cheats, corrupt agents and smugglers, his internal revenue chief said.

Increasing tax and tariff collection to 15 percent of gross domestic product from the current 13 percent is “doable” without new or higher taxes, Bureau of Internal Revenue Commissioner Kim Henares said in a telephone interview in Manila today. The agency will bind its collectors to a performance contract that will ensure targets are surpassed, and simplify processes to encourage tax payment, she said.

“I will make it clear from day one that it won’t be business as usual,” said Henares, 49, who takes charge of the tax office tomorrow after leaving the agency in 2005 as one of its deputy commissioners. Aquino’s revenue target will be pursued “as soon as possible” and may be reached in a year, she said.

Aquino has promised to fight corruption and tackle an entrenched culture of tax evasion that’s contributed to the budget deficit and hampered Philippine growth while neighbors prospered. Finance Secretary Cesar Purisima said yesterday the campaign against tax dodgers will be “unrelenting” and that programs to jail corrupt officials will be revived.

Bonds Climb

Six-year bonds are headed for their best week in almost two months as yields fell for a third day today on optimism the government will narrow the budget shortfall from record levels. The yield on the debt due January 2016 fell six basis points to a record-low 6.62 percent.

Still, “there is skepticism” on whether the deficit can be cut using “collection efficiency,” said Deanno Basas, investment director for fixed-income at ATR KimEng Asset Management Inc. in Manila, which has assets of about $150 million. “Eventually they will need to augment revenue sources.”

Budget Secretary Florencio Abad said today there will be “zero tolerance” for corruption. The Philippines ranks 139th out of 180 in Transparency International’s corruption perception index, tied with Pakistan and Bangladesh. Malaysia is 56th while Thailand is 84th.

In the 20 years through 2009, the Philippine economy expanded an average 3.7 percent annually, lagging behind Thailand’s 4.7 percent and Malaysia’s 6 percent.

Least Sincere

The internal revenue agency and the Bureau of Customs, which together make up more than 80 percent of government income, have been two of the three worst agencies in terms of “sincerity in fighting corruption” in the past two years, according to surveys by the Social Weather Station, a Philippine non-profit research group.

Tax and tariff revenue had climbed to about 17 percent of GDP in 1997. Aquino will appoint a new head for the Bureau of Customs this week, Purisima said today.

The government will review tax incentives, cut operating expenses at state agencies and may “rationalize” subsidies to state companies including the National Food Authority, whose rice sold below market prices also benefits the rich, Abad said.

Still, the Philippines may keep this year’s budget deficit estimate because there are “a lot of expectations” and due to Aquino’s pledge not to raise taxes, Abad told reporters in Manila today. The Aquino administration will review the former government’s 1.68 trillion-peso 2011 spending plan, as well as this year’s economic and fiscal targets, the budget chief said.

Spending Focus

Spending will be focused on the poor, including an emergency employment program this year with a clean-up of rivers and canals as the rainy season starts, Abad said. The government will also build more classrooms, health centers, roads and irrigation facilities, he said.

The tax agency, responsible for more than 60 percent of state income, will improve its computer system and enhance partnerships with other government offices to boost data gathering and profiling of taxpayers, Henares said. Exceeding the bureau’s collection target “should not be a problem if everyone will pull their weight,” she said.

To contact the reporter on this story: Clarissa Batino in Manila at cbatino@bloomberg.net

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