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Patterns ofPhilippine Revenue

1960-1990

Reported by John C.T. KoAugust 8, 2005

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Outline of the Presentation

I. IntroductionII. Income Sources of the

PhilippinesIII.Trends in the General

Government Revenue SystemIV.Revenue Performance by level

of GovernmentV.International ComparisonsVI.Relevant Issues

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I. Introduction

1. Government revenue system = Taxation + Borrowing

2. Public revenues keep government moving + enable Gov. to carry out its fiscal functions of allocation etc.

3. The revenue system is important because the government has steadily increased its role in the provision of social goods which the private sector could not (or does not want to) produce for reasons of unprofitability.

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Objectives of Gov. Revenue System

1. To protect the territory and its inhabitants

2. To create a stable macroeconomic foundation

3. To improve the quality of life of the people

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II. Income sources

1. Tax Revenues

2. Capital Revenues

3. Extra-Ordinary Income

4. Public Borrowings

5. Grants

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Tax Revenues

1. Definition

2. Categories: Direct and Indirect

3. Major tax revenues: Property tax, Income tax, Amnesty tax, Estate & gift taxes, Community tax, Immigration tax, Excise tax, License & business taxes, Import duties, Documentary stamps tax, Charges on forest products, Wharfage fees, Franchise tax, Import tax, Miscellaneous taxes.

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Property taxes: levied on the use or ownership of wealth or immovable property.

Income taxes: imposed on incomes of individuals, corporations and partnerships; and all fines and penalties charged.

Amnesty taxes: imposed by special laws as in the series of Presidential Decrees on delinquent taxpayers.

Estate & gift taxes: “an estate tax is a tax on the privilege of the decedent to transmit property at death. Gift tax may be in the form of donor’s or donee’s taxes. The Philippine jurisdiction imposes only the donor’s tax.

Community tax: a poll tax charged from individuals, partnerships and corporations.

Immigration tax: includes all taxes and charges imposed upon immigrants.

Major Tax Revenues in the Philippines (1)

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Excise taxes: all the taxes and fees covering imports and exports. License and business taxes: include privilege taxes, fixed percentage an

d similar taxes on practice of profession. Import duties: cover all taxes on foreign goods levied in accordance with

the tariff laws and regulations except wharfage. Documentary stamps taxes: levied upon documents, instruments, papers,

acceptance etc. Charges on forest products: imposed on timber and firewood cut in publi

c forest or from private lands, & on other forest products. Wharfage fees: charges for wharfage relative to trade. Franchise taxes: imposed for any special right or privilege granted by a g

overnment. Import tax: levied on imported materials to control their entry into the loc

al market. Miscellaneous taxes: cover all other taxes not above-mentioned.

Major Tax Revenues in the Philippines (2)

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Capital Revenue

Capital revenues cover proceeds from sales of fixed capital assets or scrap thereof and public domain and gains on such sales like sale of public lands, buildings and other structures, equipment, and other properties recorded as fixed assets.

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Extra-Ordinary Incomes

Extra-Ordinary incomes include repayments of loans and advances made by government corporations and local governments and the receipts and shares in income of the Central Bank of the Philippines, and other receipts.

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Public Borrowings

Public borrowings cover the proceeds of repayable obligations generally with interest from domestic and foreign creditors of the government in general including the national government and its political subdivisions.

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Grants

Grants cover voluntary contributions and aids given to the government for its operation on specific purposes. It does not require any monetary commitment on the part of the recipient. It can be in the form of money or materials.

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III. Trends in the gov. revenue system

1. The Pre-Marcos Era (1960-64)

2. Pre-Martial Law Marcos Years (1965-71)

3. The New Society (Martial Law Years: 1972-85)

4. The Aquino Administration (1986-90)

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III. Trends in the gov. revenue system

Per Capita Growth• Per capita revenues is reflective of what each

Filipino supposedly contributes to the government coffers.

• Lower actual per capita growth of the 70s relative to the 60s. Why?

(1) Inflation; (2) Currency depreciation

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III. Trends in the gov. revenue system

Revenue Structure• Three Categories: Tax revenue, non-tax revenue

and public borrowings

• Tax revenue and non-tax revenue declined; however borrowings increased

1. Public borrowings > non-tax receipts (See Figure 5, Page 189 & 193))

2. Revenue structure of the period: Tax revenue > Public borrowings > Non-tax revenue > extraordinary income > capital revenue

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III. Trends in the gov. revenue system

Performances & observations: Alison & Lewis Model

1. The overall performance is not comparable to that of industrialized countries.

2. Income tax revenues were way below what the model projected.

3. Real property, transfer, excise, and sales taxes decreased.

4. There were a skewed distribution of direct and indirect taxes in total revenue collection.

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IV. Revenue Performanceby Level of Government

1. Share of Collected Revenue

2. Growth

3. Composition of Revenue

4. Revenues, Price & National Income

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V. International Comparisons

1. Low tax performance in RP

2. Per capita GNP of RP in 1976 was US$370, which is 10% less than that of Japan, and 17% less that that of Singapore.

3. Direct taxes comparisons

4. Indirect taxes comparisons

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VI. Issues

1. Adequacy of Revenues & Tax Administration

2. Implications on Progressivity & Equity

3. Borrowings in National Revenues

4. Inflation and Revenues

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Thank you!

Sun-Moon LakeTaichung, Taiwan