The Philippines’ solid financial footing amidst the ongoing COVID-19 pandemic validates the “good work” of the Department of Finance (DOF) under the Duterte administration, as well as the correctness of the reforms and policies it has pursued to ensure adequate funding for the government’s strategic investments in, and for, the Filipino people, Secretary Carlos Dominguez III said Wednesday.
In his presentation before senators of the DOF’s proposed P21.24-billion budget for 2022, Dominguez said the Department’s spending program reflects the current reality of the need to modernize governance to improve the delivery of basic services to the people and be more responsive to their needs.
Dominguez said the DOF’s proposed budget also underscores the need for government offices to fast-track their digital transformation for them to thrive in the New Economy.
The DOF budget for 2022 consisting of new general appropriations totals P21.24 billion. If automatic (P1.64 billion) and unprogrammed appropriations (P21o million), and the budgetary support for government owned-and -controlled corporations (GOCCs) (P95 million) are included, the total proposed DOF budget for 2022 is P23.18 billion.
Dominguez said that although the proposed P21.24-billion budget of the Department increased by 32.7 percent as compared to this year’s approved appropriations of P16 billion, it is still 1 percent lower than its 2017 budget of P21.5 billion.
“The increase in next year’s funding will be spent for our modernization and digitalization programs to enhance our revenue enforcement capacity. These programs will allow us to effectively raise more funds to finance our pandemic response and economic recovery program,” Dominguez said in today’s hearing of the Senate finance committee on the DOF’s proposed 2022 budget.
Dominguez assured senators that the DOF will continue “to be the exemplar of prudence and fiscal discipline. We practice what we preach.”
Senator Sonny Angara, the committee chair, recommended the DOF’s proposed budget for plenary discussion after several questions by some senators.
Dominguez said that on top of its modernization programs, the increase in the DOF’s budget for the next fiscal year is because of the implementation of the corresponding salary adjustments for the employees of the Department and its attached agencies under the Salary Standardization Law (SSL).
The largest budget allocations of the DOF for 2022 are for the Bureau of Internal Revenue (BIR) with P10.9 billion, and the Bureau of Customs (BOC) with P4.35 billion, which will be spent to further improve tax administration and the digital transformation of these two main revenue agencies.
Dominguez said the BOC’s capital outlay will grow 21 times from last year’s budget because of the rollout of the Philippine Customs Modernization Project, which costs P1.58 billion.
Supported by the World Bank, the project aims to transform the BOC into a world-class customs agency by streamlining and digitalizing its systems and processes.
The modernization project is expected to be partially operational by 2023 and is scheduled to be in full operation by 2024, Dominguez said.
Aside from the mandated adjustment of salaries under the SSL, the 20-percent hike in the BOC’s allocation for personnel services is also intended to increase its filled-up personnel positions from 2,892 in 2021 to 3,444 in 2022 so that it can beef up its enforcement capabilities.
The 21-percent rise in the BIR’s financial expenses is because of the interest expense and financing charges for the lease-purchase agreement between the Bureau and the Land Bank of the Philippines (LandBank) to provide regional BIR Offices with their own buildings to better serve the public.
While the Bureau of the Treasury (BTr) may look like it has the biggest increase in next year’s budget at 96 percent from P2.16 billion in 2021 to P4.23 billion in 2022, the bulk of its appropriation is for national government operations. Only 26 percent of the BTr’s proposed 2022 budget is for its regular operations.
These national government expenses, which make up 74 percent of the BTr’s budget, include the Philippines’ quota subscriptions or equity contributions to continue being a member of different multilateral institutions.
Such membership in various multilateral institutions gives the Philippines continued access to concessional financing and technical expertise to support key projects and programs, and allows it to vote on policies and plans of action that these institutions undertake.
“Our equity contributions are pooled together with the contributions of other member-countries to fund projects and programs supported by these multilateral banks. In essence, the Philippines is both a contributor and a beneficiary of its equity investments in these multilateral institutions,” Dominguez said.
The proposed budget of the Office of the Secretary (OSEC) is P1.1 billion, which is 30 percent more than its appropriations this year, owing to the increase in its maintenance and other operating expenses (MOOE), which include operating requirements for projects such as the digital Philippine National Single Window (NSW) that will allow the automation and streamlining of trade processes among the different regulatory agencies.
The OSEC will also improve the Philippine Tax Academy (PTA), which is an essential institution that trains all revenue agencies to improve their competitiveness and expertise. This includes the training of municipal treasurers and provincial treasurers.
The remaining five DOF-attached agencies—Privatization and Management Office (PMO), Bureau of Local Government Finance (BLGF), Insurance Commission (IC), Central Board of Assessment Appeals (CBAA) and the National Tax Research Center (NTRC)—have a combined proposed budget of P723.2 million pesos or around 3 percent of the total DOF budget.
The increases in their appropriations are mainly because of their respective information and communications technology (ICT) infrastructure upgrades to support the ongoing modernization programs to prepare for the new economy, Dominguez said.
The DOF’s unprogrammed appropriations amount to P210 million for the refund of the service development fee for the government’s Nampedai property in Japan. Since 2012, it has been allotted in the budget of the DOF with its utilization contingent on the finalization of the case, Dominguez said.
He said the Retirement and Life Insurance Premium, and Special Accounts in the General Fund account for the DOF’s automatic appropriations of P1.6 billion.
The budgetary support for GOCCs of P95 million is allocated for the implementation of the Specialized Tax Training and Education Management Program of the PTA.
During the hearing, Dominguez cited the DOF’s major accomplishments, which include the modernization of tax policies through the Tax Reform for Acceleration and Inclusion (TRAIN) Act and the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Law to lower both personal and corporate income tax rates, and ensure a reliable revenue stream for the government’s economic investments.
He thanked the Congress for passing these tax reform packages.
Angara, in turn, also thanked Dominguez and cited the Congress’ support for the DOF’s efforts to modernize the tax system.
Dominguez pointed out that it was only during the Duterte administration’s DOF that excise taxes on “sin” products were increased thrice; the cigarette industry was cleaned up; a sustained crackdown was conducted against tax-evading Philippine Offshore Gaming Operators (POGOs); and smuggled items, regardless of their cost, were destroyed to demonstrate the government’s resolve against smuggling.
The DOF’s exemplary financial and debt management also brought the country to its historic low debt-to-GDP (gross domestic product) ratio and its highest-ever revenue effort, which resulted to its highest credit ratings ever that has been maintained amid the wave of downgrades globally, Dominguez said.
Thus, when the pandemic struck, the government was able to quickly access emergency financing with concessional terms for its COVID-19 response; implement fiscally responsible stimulus measures that helped save lives, jobs and the economy; and secure funding for economic investments.
As for the spending performance of the DOF, Dominguez underscored the Department’s high budget utilization rate from 2016 to 2020 to show that there is no wasteful spending in the fulfillment of its mandate.
The DOF’s disbursement rate averaged 80 percent and its obligation rate 86 percent, from 2016 to 2020.
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