Interview: Cesar V Purisima
To what extent can the Philippines institutionalise financial reforms and transparency?
CESAR V PURISIMA: Over the past five years, we have instituted various public finance reforms, namely initiatives in bottom-up, zero-based and grassroots participatory budgeting. We have led with transparency, believing that open budgets and an open government lock in our path to prosperity. Apart from the national budget, we have striven to make revenues – especially in the extractive industries – transparent. Even foreign aid is tracked and publicly accessible online via the Foreign Aid Transparency Hub.
In terms of prudence in public financial management, our resilient debt profile speaks for itself. General government debt stood at 44.8% as of end-2015, the lowest since at least 1996 – the earliest year with comparable data – and significantly narrower than the 54.8% recorded in 2009.
Our domestic-to-foreign debt mix has also shifted, with the share of foreign debt falling from 44% to 33%, and Filipinos are seeing the benefits of having built a financial buffer against external headwinds. Financial reforms have also caused us to widen our tax take from 12.1% of GDP five years ago to the current level of 14.2%, without raising any new taxes, apart from the Sin Tax Reform bill. Increased fiscal space allowed us to invest a lot more in our people. Budgets for social services have gone up by 471%, basic education by 79% and health by 211%, since 2010.
How can tax reforms, for both corporate and personal income tax rates, help boost revenue and reduce informal economic activity?
PURISIMA: We believe that a holistic, revenue-positive and equitable reform package can re-engineer a more competitive economy. This must be done in a balanced and responsible manner with fiscal sustainability as an end-goal. I believe in empowering tax administration, alongside designing a simpler, more focused tax system. As the election draws nearer, the impetus to be more critical becomes greater.
We have increased the rate of tax collections to GDP from 12.1% in 2010 to 14.2%, as of the end of the third quarter of 2015. The effective implementation of the Sin Tax law and the administrative initiatives of the Bureau of Internal Revenue (BIR), which include tax stamps, is integral to this improvement. Owing to these reforms, total incremental revenues now stand at P149.5bn ($3.3bn). We have likewise intensified our efforts to target tax evaders and smugglers, with 210 Run After The Smugglers cases filed during this administration’s term, generating total duties and taxes of P26.1bn ($579.4m), and 397 Run After Tax Evaders cases filed, amounting to P72.9bn ($1.6bn).
We continue to simplify tax compliance for taxpayers with the rollout of electronic filing. In the first half of 2015, the BIR registered 16% of taxpayers as e-filers, almost double the number recorded in the previous year. The overall e-filing rate is expected to be at least 25% by the end of 2015.
How can automation and streamlined Customs procedures strengthen the Philippines’ business friendliness and facilitate its regional integration?
PURISIMA: The Customs Modernisation and Tariff Act (CMTA) is nearing final approval. The bill is set to make us compliant with the Revised Kyoto Convention, consistent with the global trend towards harmonisation, modernisation and the simplification of Customs procedures. CMTA embraces technology as a governance tool. Modernisation of Customs operations is long overdue, and electronic transactions minimise face-to-face transactions and opportunities for corrupt practices. It also provides a threshold free-carrier value of P2000 ($44.40), below which no duties and taxes can be collected. This allows for goods to be processed quickly for release. A lean Customs operation is the key to greater regional trade.
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