RP needs to improve tax administration, says WB

MANILA, Philippines – The Aquino administration would need to continue improving on tax administration to strengthen revenues, the World Bank (WB) said in its quarterly update entitled “Stepping Up Reforms to Sustain Growth.”

The Washington-based Fund said that the government needs to do away with “inconsistent spending efficiency and significant gaps in public expenditure and financial accountability.”

“For the 2011 budget to indeed turn the country away from a weak fiscal position, inconsistent spending efficiency, and significant gaps in public expenditure and financial accountability, efforts initiated in this budget will have to both be sustained over time and expanded. Strengthening revenue mobilization – through a modern tax system with efficiency and equity at its core – would enable future budgets to scale up spending needed to generate inclusive growth,” it said in a report.

The Aquino administration is seeking a budget of P1.645 trillion for 2011 dubbed as the reform budget and which Budget Secretary Florencio Abad said is focused on prudent spending and fiscal discipline.

“The 2011 budget changes current dynamics in two critical areas: the (structural and cyclical) fiscal policy stance and the quality of public finances. This “reform budget” renews the fiscal consolidation effort – albeit modestly – and contains significant reform measures aimed at improving spending efficiency, transparency and accountability of the budget,” it said.

However, the World Bank said challenges remain as the Aquino administration needs to stay focused on reducing poverty.

It noted that while the economy is “creating wealth at a rapid pace,” it is also generating inclusive growth.

“The labor market is recovering but structural weaknesses remain, including high levels of informality, while poverty and hunger incidence are not declining noticeably. Indeed, while in most countries rapid and sustained economic growth is associated with reduction in poverty incidence, this has not been the case in the Philippines in recent years,” the World Bank said.

It expects the Philippine economy to grow by 6.2 percent in 2010 and by 5 percent in 2011 “with large but broadly balanced risks.”

“External shocks such as the El Niño phenomenon have further hindered progress in tackling poverty. Tackling the above structural impediments would help ensure that the benefits from growth are widely shared,” it said. –Iris C. Gonzales (The Philippine Star)