Government hopes to have kept deficit in check this month

BY PRINZ P. MAGTULIS

THE GOVERNMENT remains hopeful of having kept the fiscal deficit in check this month on the back of "on track" tax collections and seasonally low spending as the fourth quarter started, officials said in separate interviews yesterday.

This, even as the Customs bureau, which accounts for a fifth of government revenues, expects to have missed its P23.8-billion cash collection target this month due to the impact of duty-free importation of oil, wheat, cement and motor vehicles from Japan, as well as tax credits for importers.

Budget Secretary Florencio B. Abad said in a phone interview that the government had a lot of "leeway" for spending in October, with a cap pegged at P98 billion, higher than the P84-billion average state monthly spending in the third quarter.

But he said that "traditionally, it [spending] tapers off in the last three months... With higher cap, we should be able to spend within our [capacity]."

"Prudent spending" was tagged as the reason behind the P259.8-billion shortfall as of end-September, which was 80% of the full-year cap of P325 billion but still below the P273.7-billion ceiling for those nine months.

Expenditures totaled P1.15 trillion as of September, lower than P1.208 trillion programmed that period, but revenues were P40.3 billion short at P894.7 billion, largely due to the Customs bureau’s shortfall that month.

Nelson M. Aspe, deputy commissioner for operations of the Bureau of Internal Revenue (BIR), said preliminary data show the bureau seems to be "on track" to meeting its P52.5-billion goal for October. "We are on track. Probably we will meet our target for the month," he said by phone.

The BIR, which contributes nearly 70% to state revenues, beat its P59.9-billion target last month, collecting P60.96 billion to bring total collections as of September to P607.33 billion, more than 60% of its P860.4-billion full-year target.

But Customs Commissioner Angelito A. Alvarez said in a separate interview that his bureau will likely post "another shortfall" this month, despite an expected 25% year-on-year increase in October collections on the back of seasonally higher importation for the Christmas season.

"It is still because of the zero-tariff on [certain] products and the numerous applications for tax credit by importers," Mr. Alvarez told reporters yesterday.

The rising peso is also cause of concern, Mr. Alvarez added, saying that every P1 rise in foreign exchange costs the Customs bureau about P2.7 billion in collections a year. The government had assumed an exchange rate of P45 to the dollar for its budget plan this year, but the peso had hit a high of P43.10 this week, its strongest since May 2008. "For 2010, we’re expecting losses of P5.4 billion due to the strong peso," Mr. Alvarez said, explaining this estimate is based on a P2 appreciation of the peso against the official assumption.

As of end-September, the Customs bureau, tasked to collect P280 billion this year, had collected P190.84 billion after incurring a P6-billion shortfall against its P26.563-billion target for last month alone.

Mr. Alvarez said the bureau still hopes to meet its P241-billion cash collection target for the year with the help of the voluntary disclosure program (VDP) that starts on Nov. 15. He said VDP, which will run until early next year, should result in "over a billion pesos" in collections. VDP, first implemented in 2007, scraps surcharges and penalties of delinquent importers who voluntarily settle their obligations within the prescribed period. -- with Reuters