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MANILA – The government’s deficit and revenue ratios improved in the first quarter alongside the better-than-expected growth of the Philippine economy.
In a statement, the Department of Finance said the government’s revenue effort – revenue as a percentage of gross domestic product – rose to 14.9 percent in the first quarter of this year, up from last year’s 14.4 percent ratio, which is also the full-year target for 2012.
The tax effort – defined as taxes as a percentage of GDP – increased to 12.5 percent, also up from 11.8 percent last year, and inching closer to the 2012 target of 13.2 percent.
The deficit-to-GDP ratio eased to 0.8 percent in the first three months of this year from last year’s 1.2 percent, and was lower than the full-year target of 2.6 percent.
“Comparison of deficit, revenue and tax collections against GDP growth provides a clearer view of how much the government is collecting to support a growing economy and lessen its necessity to borrow. The rationale is as the economy expands, more revenues are collected by the government,” said Finance Secretary Cesar V. Purisima.
Philippine GDP grew by 6.4 percent in the first quarter, making it Asia’s second-fastest growing economy next to China. The Philippines’ budget deficit hit P33.909 billion in the January to March period, well below the P82.808-billion ceiling for the period.
“During the first quarter, the economy expanded by more than expected despite a narrower deficit. We are committed to continuously pursue a faster, sustainable and inclusive growth while being mindful of our fiscal consolidation process,” Purisima said.
“Double-digit collection growths posted by BIR and Customs are way faster than how the economy expanded in the first quarter, leading to better revenue efforts for both bureaus,” he said.
The Bureau of Internal Revenue, which accounts for 70 percent of tax revenues, grew its collections to 9.5 percent of GDP in the first quarter, up from 8.9 percent in the same period last year. The BIR is aiming for 9.8 percent revenue effort by the end of this year, from 9.5 percent last year.
The Bureau of Customs recorded a 2.9 percent revenue-to-GDP ratio, also up from 2.8 percent in the first quarter of 2011. Customs is aiming for 3.4 percent, higher than last year’s 2.8 percent.
“Our sustained focus on improving tax administration efficiency continues to bear fruit. We believe that as we move toward the latter part of the year, we will continue to see better results on the part of revenue agencies as reforms are continued to be undertaken,” Purisima said.
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