Public Fiscal Administration Report Outline

Title: Issues and Problems in Public Fiscal Administration – Revenue Administration and Expenditure
Administration

Revenue
- It is a government income
- The income of government from all sources used to pay as nation’s expenses

Major source of revenue:

- Tax of transfer of real property ownership
- Tax on business of printing and publication
- Franchise tax
- Tax on sand, grave and other quarry resources
- Professional tax
- Amusement tax
- Annual tax

Characteristics of a Tax:
- It is an enforced contribution
- It is generally payable in money
- It is proportionate in character
- It is levied on persons, property or the exercise of a right or privilege
- It is levied by the state, which has jurisdiction over the subject or object of taxation
- It is levied by the law-making body of the state
- It is commonly required to be paid at regular periods of interval

Purposes and bases of taxation

- State or government’s purpose – needs finances for social goods and services
- Resources – needs to support the operations of the government
- Development – as an instrument for directing the economy towards prosperity
Capital information, allocation of resources, and redistribution of income and wealth
- Economic stability

Agency handles the revenue administration

(Prepare org chart)

DOF as the financial administration
BIR and BOC the major tax collecting agencies

Role of BIR – comprehend the assessment and collection of all national internal revenue taxes, fees and
charges, the enforcement of all forfeitures, penalties and fines connected, therewith, including the
execution of judgement in all cases decided in its favor by the court of tax appeals and the ordinary
court

Of the two functions of the BIR, assessment and collection, the effectiveness of the collection depends
on the quality of the assessment done by the enforcement officers/officials assigned for such duty.

Assessment function can further be subdivided into two major activities

 - Voluntary or self-assessment
- Enforced assessment

Role of BOC
 Responsible for assessment and collection of the lawful revenue from imported articles and all other
duties, fees, charges, fines and penalties accruing under the tariff and customs law • Prevention and
suspension of smuggling and other frauds upon customs

Philippine Tax Structures

- Corporate Tax
- Capital Gain Tax
- Customs Duty
- Value Added Tax
- Income Tax
- Percentage Tax

Public Corporations
- These corporations were created or established by a special charter or law in the interest of the
common good and subject to the test of economic viability.
- They are directly under the Government Corporate Monitoring and Coordination Committee,
which has the primary responsibility to monitor, coordinate and conduct performance valuation
of all Government-Owned and Controlled Corporations (GOCC)
- Based on the Office of the Government Corporate Counsel records, there is a total of 105
GOCCs.

Issues and Problems in Public Fiscal Administration – Revenue Administration

- Budget deficit
A. is the annual shortfall between government spending and tax revenue. The deficit is the
annual amount the government needs to borrow. The deficit is primary funded by selling
government bonds (gilts) to the private sector.
B. One of the most important practical aspects of tax design, especially in developing
countries, is the administrative capacity of government to collect taxes properly. If the
government is able and information is complete, then a progressive form of direct tax would
be the best taxing scheme. On the other hand, if the revenue collection institution is weak it
may be better to depend more on indirect levies like value-added tax (VAT) and excise tax.
C. If revenues are inadequate to finance planned expenditures, the government has three
options to close the budget gap: borrow, print money, or increase taxes. In the past, the
Philippine government has resorted to external and domestic borrowing to finance its
deficits. It has amassed huge public debt not only to finance previous years’ budget deficits
but also to pay for losses incurred by other public sector institutions such as poorly
performing government owned or controlled corporations, public financial institutions and
the Central Bank (CB) but which were later assumed by the national government. (Diokno,
Benjamin E. (2008) : The Philippines: Fiscal behavior in recent history, UPSE Discussion Paper,
No. 2008,04, University of the Philippines, School of Economics (UPSE)

- Tax Evasion
 A. is the illegal evasion of taxes by individuals, corporations, and trusts. Tax evasion often
entails taxpayers deliberately misrepresenting the true state of their affairs to the tax
authorities to reduce their tax liability, and it includes dishonest tax reporting, such as
declaring less income, profits or gains than the amounts actually earned, or overstating
deductions.
B. Tax evasion is an activity commonly associated with the informal economy.[1] One measure
of the extent of tax evasion (the "tax gap") is the amount of unreported income, which is the
difference between the amount of income that should be reported to the tax authorities and
the actual amount reported.
C. In contrast, tax avoidance is the legal use of tax laws to reduce one's tax burden. Both tax
evasion and tax avoidance can be viewed as forms of tax noncompliance, as they describe a
range of activities that intend to subvert a state's tax system, but such classification of tax
avoidance is disputable since avoidance is lawful in self-creating systems.
D. The BIR implement the Run After Tax Evaders (RATE) Program – Development of tax
fraud/evasion cases by the criminal investigation offices of the BIR, including the
development of fraud cases from regular audit activities. Tax Fraud Investigation are done by
the National Investigation Division (within the BIR National Office) and Special Investigation
Divisions (found in every BIR Regional Office). The source of information are from Taxpayers
own information (own tax return declarations, own books of accounts) Information obtained
from third parties (from private sectors, other government offices (e.g. land registration office,
local government, transport office) and information obtained from intelligence work.
(https://www.imf.org/external/np/seminars/eng/2012/asiatax/pdf/henares.pdf)
E. Whistleblower – submission of information of tax fraud/tax evasion or violations of the
National Internal Revenue Code (Tax Code) is being encourage. Tax Code under Sec 282
provides for an informant reward process (equivalent to 10% of the resulting tax collection
but in no case more than P1,000,000)
- High Taxes and expanded value added tax

Expenditure
- Government spending or expenditure includes all government consumption, investment and
transfer payments.
Agency handles expenditure administration:
DBM – is responsible for the formulation and implementation of the National Budget, and the efficient
and sound utilization of government funds and revenues to achieve the country’s development goals
Expenditures by expense class show how much is much is provided:
1. Current operating expenditures – appropriations for the purchase of goods and services for
conduct of normal government operations within a budget year; such as the salaries,
maintenance and operating expenses, interest payment etc.
2. Capital outlays – appropriations of goods and services the benefits of which extent beyond the
budget year and which add the assets of the government including investments in the capital
stock of government owned or controlled corporations
3. Net lending – net advances by the national government for the servicing of government
guaranteed corporate debt and loans outlays by the national government corporations
4. Debt amortization – contribution to the sinking fund which is utilized for principal repayments of
our loans
Issues and Problems in Public Fiscal Administration – Expenditure Administration
- Malversation of Public Funds