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July 25, 2007

Manila cuts tax goals, keeps 2007 deficit target
The Philippines has cut by 3% its target for tax revenues this year but raised its goal for asset sales, allowing it to keep its 2007 budget deficit target, official documents on July 25 showed.

The Southeast Asian nation wants to limit its shortfall to 63 billion pesos (US$1.4 billion) this year, or 0.9% of gross domestic product, but was already running a third over plan at mid-year after its main tax collection agencies failed to tackle evasion and corruption.

To plug the gap, Manila is hoping to use profits from the sale of about 100 billion pesos worth of state stakes in companies.

The cabinet-level Development Budget Coordination Committee approved a lower tax revenue target of 973.6 billion pesos for this year against an original goal of 1.003 trillion pesos, according to documents obtained by reporters.
The main tax agency, the Bureau of Internal Revenue, should collect 741.3 billion pesos this year, down from an original goal of 765.8 billion pesos, the documents show.

The Bureau of Customs is expected to collect 223.1 billion pesos against its original goal of 228.2 billion pesos this year.

But the committee raised non-tax revenues -- mainly from asset privatisations, dividends from government corporations and various fees and charges -- by 26 percent to 145.2 billion pesos.
A higher target for asset sales of 55.2 billion pesos against an original goal of 25.7 billion pesos accounted for the increase in non-tax revenues.

The government wants to sell a 24% stake in San Miguel Corp worth about 50 billion pesos and raise a total of about 50 billion pesos from the sale of a 60% stake in geothermal firm PNOC-Energy Development Corp.

It has already sold 20% of PNOC-EDC earlier this month for about 17 billion pesos.

Fitch Ratings said on Tuesday that weak Philippine tax collection, if left unchecked, could put the government's ambitious infrastructure plans and medium-term growth prospects at risk. Reuters

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