053107: Editorial: Hold on tight

FOR the past several weeks, keeping track of developments in the Executive’s economic team has been like watching a fast-paced ballgame. Figures—and the arguments that go with them—have been thrown around in different directions, and changed so quickly it has been hard to get a handle on the total situation. The explanation for this seems to be, simply this: there’s a lot of internal disagreement within the team members with regard to policy and the right strategies and their timing. Which is problematic, because any signal of uncertainty in the fiscal sector tends to be picked on by credit-rating agencies, multinational groups and investors as a reason for downgrading expectations and, subsequently, easing up on commitments to set up business or expand existing ones. The debates started to reach fever pitch just before the elections when the revenue figures started to stream in, and the shortfalls triggered various reactions. We all learned there was a lot of fingerpointing for such shortfalls, especially since a revenue lack would translate into government not being able to fulfill its vaunted “social payback,” as trumpeted before the elections. It didn’t help of course that National Treasurer Omar Cruz resigned recently because of alleged policy differences with Finance Secretary Margarito Teves. Besides the blame game, the unsatisfactory record in the revenue department has also sparked a lot of internal dispute among fiscal experts, leading to the scaling down of revenue assumptions by the interagency Development Budget Coordination Committee (DBCC), and the resulting recriminations. On Wednesday, we got word that a Malacañang official is blaming the flaws in the policies of the Department of Finance (DOF) to an adviser of Secretary Teves. According to this official, the DOF has been embroiled in a lot of controversies due to Teves’s allegedly faulty revenue goals, which are in direct contrast with the revenue projections of the DBCC. In the view of this official, Teves’s move to drum up fears that the government’s gains would be eroded by the poor performance and alleged shortfalls of his collection agencies actually puts the President in an embarrassing position. There is talk that the “irrational” projections of Teves may be attributed to his adviser, described as a critic of the President and supporter of the “Hyatt 10.” Citing constrained growth in the region and around the world, the DBCC recently adjusted its revenue assumptions for this year after the Asian Development Bank released its growth projection of only 5.4 percent for 2007. The revised revenue target of the Bureau of Internal Revenue is P718.67 billion, down from the original target of P765.9 billion; and the Bureau of Customs target to P165.12 billion from the original P228.2 billion. This means the tax collections of the two agencies will be lowered by more than P100 billion from the original target of P994.1 billion. The new tax revenue is expected to hit P890.209 billion, which includes income from other government agencies. The DBCC had earlier explained that the committee changed its assumptions as a result of the softening prices of oil in the world market, which will translate into lower collectible taxes by the agencies. Yet, in the view of some independent fiscal experts, there’s more than meets the eye in the downscaling. It signals, they said, that the government’s technical people are not really sure where the money can still be sourced if the original, high assumptions are rammed through. This only means that people will be squeezed further in the next few months, and instead of payback, we may see more calls for “sacrifice” from the same people who gave us the expanded value-added tax. Hold on tight.

 

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