Manila's main tax agency says to miss 2008 goal

The Philippines' main tax agency will likely miss its 2008 revenue goal by 5 percent mainly due to a new law exempting minimum wage earners from income tax payments, official documents showed on Monday. Slower than expected economic growth this year would also weigh on corporate profits and pull down corporate collections, according to documents from the Finance Department obtained by reporters.
The Bureau of Internal Revenue, which makes up about two-thirds of government revenues, expects to collect just over 801 billion pesos ($17 billion) this year compared to a goal of 845 billion pesos. The Philippines abandoned its goal of balancing the budget this year and now expects a deficit of 40-75 billion pesos as it cranks up spending to pump prime the economy, which has been suffering from braking growth amid faltering consumer demand and weak export growth.
But the government has said its goal of at least 5.5 percent growth in gross domestic product (GDP) this year would be tough to achieve after the economy grew around 4.7 percent in the first half, further weighing on tax collection efforts. A Reuters poll in August showed analysts expect the economy to grow just 5.1 percent this year from a three-decade peak of 7.2 percent last year.
Finance Secretary Margarito Teves has previously said every one percentage point drop in GDP would result in revenue losses of 10.8 billion pesos for the government. In May, Congress passed a law exempting minimum wage earners from income tax payments to help them cope with rising food and fuel prices. Lawmakers said the government would recover any revenue loss from the measure by increasing taxes on the self-employed.
The internal revenue agency said it would lose 11.81 billion pesos from the income tax reform measure between August and December this year. It did not say how much it would gain from higher taxes on the self-employed.
Despite weaker tax revenues, National Treasurer Roberto Tan said last week the government may decide not to go back to the overseas debt market this year given its healthy cash position. It has also cut its domestic borrowings for the rest of the year, cancelling a scheduled 6-billion-peso Treasury bill auction on Monday.