Poor tax collection to derail poverty reduction efforts–PIDS

THE country’s poor tax effort and the effects of the global financial crisis could derail the government’s quest to achieve the Millennium Development Goals (MDGs) by 2015, a government think-tank said. “The country’s tax effort is worrisome. It’s a cause [for] concern because it affects the chance to achieve the MDGs,” Josef Yap, president of Philippine Institute for Development Studies (PIDS) said.

The MDGs are eight time-bound goals aimed at significantly reducing—if not completely eradicating—extreme poverty by 2015. Compared with its neighbors, the Philippines lags behind in meeting its MDG targets like eliminating poverty and hunger, achieving universal primary education, reducing maternal deaths, and combating HIV and AIDS.

Yap said tax effort in the first half of the year fell 13.5 percent from 14.1 percent last year.

The country’s tax effort was lower compared with Malaysia at 15.3 percent, Brunei, 37.5 percent and Thailand, 15.2 percent. But the Philippines fared better compared with Indonesia, which has a tax effort of 13.3 percent.

“Fiscal reforms have to be implemented to ensure achievement of MDGs,” since the government would have to shoulder a funding gap of 1.1 percent to 1.8 percent to gross domestic product (GDP) annually in order to achieve the MDGs, Yap said.

“[But] ironically, structural problems in the Philippine economy shielded economy from harsher effects of crisis,” therefore, the impact on the country was not as adverse compared with other East Asian economies, he added.

Benjamin Diokno, former Budget secretary during the Estrada administration, earlier said the next administration is likely to face a fiscal crisis because of weak revenue collections and legislated tax cuts.

Diokno projected that the country’s tax-to-gross domestic product ratio may drop to 11 percent to 12 percent next year from 14 percent in 2007.

Data from the Department of Finance showed that revenues collected by the Bureau of Internal Revenue and Bureau of Customs in the first nine months dropped 4.6 percent to P839.8 billion from last year’s P879.9 billion.

On top of the poor collection, the National Economic and Development Authority (NEDA) had said the country would be “off track” in achieving the MDGs in five years’ time because of the series of natural disasters.

Because of these, the country may not be able to meet its targets on elementary participation and cohort survival rates, the ratio of girls of 100 boys in elementary and secondary level, maternal mortality ratio, and women and men practicing family planning or contraceptive prevalence rate, Ramon Falcon, NEDA’s supervising economic development specialist, said.

Falcon had said that about P480.8 billion, or 0.67 percent of GDP is needed to meet the targets for the period 2010 to 2015.

These estimates were done for poverty, basic education and health, HIV/AIDS, malaria and other diseases, and water and sanitation. –Darwin G. Amojelar, Senior Reporter, Manila Times