EXAMPLE: KUMPIT TRADE IN THE SOUTH Source: Villanueva (2013) Annual income of up to P132M (Tawi-Tawi) and P396M (Sulu), or a total of P528M, from cross- border illicit trade This shadow economy constitutes 0.52% of the ARMM economy (measured by GRDP). Nationally, between 2002 and 2011, the government lost an estimated P1.3 trillion in taxes and duties due to smuggling.
6 Net Sincerity Ratings in Fighting Corruption (Selected Agencies)
7 BOC: DEVELOPMENTAL AGENCY? Composition of BOC Collections
8 BOC: DEVELOPMENTAL AGENCY? Share of BOC Revenues in Total Government Revenues
9 40 CENTAVOS OUT OF EVERY 1 PESO REVENUE LOST An Illustration of the Growing Gap Between Actual Total Revenue and Potential Total Revenue
10 Revenue Loss from Trade Misinvoicing Juxtaposed Against 2015 Public Spending BOC: DEVELOPMENTAL AGENCY?
11 Revenue Loss from Trade Misinvoicing (in % of actual total BOC revenues) BOC: DEVELOPMENTAL AGENCY?
12 INCREASING TRANSPARENCY AND ACCOUNTABILITY Transparency in key information on BOC operations “Crowd-sourcing” data gathering, fact-checking, and analytical inputs “Third-party monitor” serving as “demand side” for sustaining reforms
14 BUDGET AND SPENDING REFORMS Results-based Budgeting Open Government Initiative Grassroots Participatory Budgeting Performance-Informed Budgeting Additional proposals: –District Development Councils –People’s Fund –EITI
RESULTS-BASED BUDGETING Medium-Term Expenditure Framework (MTEF, 2007) Organizational Performance Indicator Framework (OPIF, 2007) Zero-Based Budgeting (ZBB)/ Program Evaluation (2010) Results-Based Performance Management System (RBPMS) Performance-Based Incentive System (PBIS)
OPEN GOVERNMENT INITIATIVE National Government Expenditures, Obligation Basis, By Sector (2013)
17 GRASSROOTS PARTICIPATORY BUDGETING Fiscal Year 2015 Grassroots Participatory Budgeting (PHP billions) 1,590 local government units involved Total Amount = PHP 20.9 billion (0.8% of proposed 2015 budget)
19 PERFORMANCE-INFORMED BUDGETING Example: PNP Indicators and Targets in the GAA 2014 Selected Performance Indicators Targets % of crime incidents responded to within 15 minutes 100% % of most-wanted persons arrested 5% increase % change in crime rate5% reduction
20 PERFORMANCE-INFORMED BUDGETING Example: DSWD Indicators and Targets in the GAA 2014 Selected Performance IndicatorsTargets Number of individuals assisted5,488,237 Number of crisis situation beneficiaries 281,079 Number of requests for assistance processed within 24 hours 100% % of persons assisted in last 3 years found ineligible 5%
21 PERFORMANCE-INFORMED BUDGETING Example: DOST Indicators and Targets in the GAA 2014 Selected Performance Indicators Targets % of projects evaluated at least twice in last 2 years 95% % of projects in last 3 years with findings published or used commercially 70% Number of firms assisted1841
WHY BRING THE “PUBLIC” BACK INTO “PUBLIC FINANCE”? 22 EFFICIENCY + TRANSPARENCY = ACCOUNTABILITY
25 CountryTax Rate for Highest Income Bracket (%) Tax Rate for Lowest Income Bracket (%) VAT Rates (%) Vietnam35510 Thailand3557 Philippines32512 Indonesia30510 Malaysia2626 Myanmar2555 Laos24510 Cambodia20510 Singapore2027 Tax Rates for ASEAN Countries IMPROVING EQUITY IN TAX POLICY
26 IMPROVING EQUITY IN TAX POLICY 5.7M taxpayers paid their income taxes in 2012. Of which, around 17% falls under the middle class (P64,317 – P787,572 annual income) Income Range (annual income) % of total taxpayers% of total income tax revenue contribution Lower ClassBelow P64,31779.99%0.15% Middle ClassP64,317 – P787,57218.14%18.13% Upper ClassP787,572 and above1.87%81.72% Source: Virola et. Al (2013). Will the Recent Robust Economic Growth Create a Burgeoning Middle Class...” Bureau of Internal (Revenue Data on Income Tax Filers 2012), Bureau of Treasury
IMPROVING EQUITY IN TAX POLICY 27 # of taxpayers Total tax intake per income group Tax due per unit (annual) Lower Income Class 4,072,153P1.85MP45.40 Middle Income Class 923,186P22.50BP24,362 Upper Income Class 10,584P101.40BP1.1M Total income tax revenues comprises 15% of total government revenues collected Source: Virola et. Al (2013). AIM Policy Center calculations using BIR data
28 Estimated Tax Revenues from Existing Tax Regime and Tax Proposals IMPROVING EQUITY IN TAX POLICY