By Donabelle Gatdula, Philippine Star
It was more than a century ago when the Filipinos' quest for freedom from Spain led to the establishment of the first Philippine government, the Pamaha-laan ng Sangkatauhan. The new government which was established in April 1897 had for its first Finance Minister Baldomero Aguinaldo.
The first finance director also became the first secretary of treasury under the Constitutional Republican government otherwise known as the Biak na Bato Republic. Other finance secretaries under this republic were Mariano Frias (from 1898-1899 under the Mabini cabinet) and Hugo Ilagan (1899 under the Paterno cabinet).
During that time, Finance had a very wide scope. It used to manage and supervise the budget of the entire government, tariff, justice, and banking sector. Also, was the Bureau of Treasury under DOF that issued money.
During the time of the American colonizers in 1901, the Department of Finance and Justice was formally organized by virtue of an act passed by the Civil Service Commission headed by William Howard Taft. Gregorio Araneta was the first Filipino appointed as secretary of Justice and finance.
It was in the hands of the Americans (1901 to 1934) that the Philippines learned to engage in free trade.
Another highlight of the American period was the passage of Reorganization Act No. 2666, which divided the Department of Finance and Justice into two independent departments.
A year later, the government introduced a budget system that called for the preparation of an annual budget based on income and expenditures estimates by various government agencies. The system was developed six years before the federal government of the United States had its own. Under the scheme, the Governor General would submit the prepared budget to the Philippine Legislature for approval.
This particular system is still being practiced up to now: the Executive Department through the Department of Budget and Management submits to Congress its proposed annual budget for approval.
In 1919, another significant piece of legislation was passed. It was the Philippine Legislature Act No. 2833 otherwise known as the "Philippine Income Tax Law." This also started the raising of revenues through collection of taxes.
During the Commonwealth era the government introduced various revenue-generating measures such as percentage tax to enhance its revenue collections.
In 1936, DOF functions related to the formulation and preparation of the National Government budget were transferred to the newly created Budget Commission. The preparation of income and resource estimates remained with the department.
Through Commonwealth Act No. 466, the National Internal Revenue Code was enacted in 1939.
During the Japanese occupation in 1942, the Japanese authorities imposed various sales and luxury taxes and printed Japanese war notes to finance government operations interrupted by war.
When the Central bank of the Philippines was created in January 1949, the banking supervision of the DOF was transferred to the newly formed CBP. Then DOF Secretary Miguel Cuaderno relinquished the Finance portfolio to Pio Pedrosa to serve full time as first CB governor.
During the post-war years, the DOF had revised the tax system. The Tax Commission was created and collection of unpaid taxes was intensified. The Bureau of Customs and Internal Revenues were reorganized. Dishonest and inefficient government employees were weeded out.
The passage of new tax measures such as increased tax rates on certain commodities and corporate income, and 17 percent tax on sale of foreign exchange helped achieve a balanced budget from 1952 to 1954.
The need for close coordination between monetary and fiscal policies was addressed by designating the finance secretary as chairman of the Monetary Board, the policy-making body of the Central Bank.
During President Ramon Magsaysay's term, the DOF issued bonds of up to P1 billion to finance government projects. The result was a budget deficit which caused the Central Bank and DOF to implement monetary and fiscal measures such as trimming down expenditures to stabilize the economy. This marked the start of the Philippine economic boom-bust cycle.
In 1957, a new tariff act was passed implementing the policy of protected industrialization. Tariffs of up to 1000 percent were imposed on consumer and finished goods while lower tariffs were levied on industrial raw materials.
Two years later, the government pursued an overall stabilization program to curb the growing government deficits, which resulted from massive spending on the three-year economic development program that lasted from 1955 to 1958.
The National Government succeeded in stabilizing fiscal operations in 1960 with the imposition of a margin levy of not more than 40 percent on the sale of foreign exchange.
From 1970 to 1985, government policy turned increasingly interventionist. A study shows that from the 1940s to 1985, the Philippines shifted from a basically laissez faire economy to a public sector-oriented economy.
The government undertook in 1986 a tax reform package that introduced the value-added tax (VAT) system to replace the distortionary sales tax system. The reform packages also abolished all export taxes (except on logs), withdrew unnecessary tax and duty exemptions and replaced tax exemptions with subsidies for a more transparent tax system. The DOF also introduced an import-inspection scheme at major ports of entry to speed up customs inspection.
The Ramos regime was believed to have provided one of the best times for DOF. The government was able to start net repayments of the country's foreign and domestic debts. It was during the time of Ramos that the macroeconomic environment vastly improved after the Economic Stabilization Program of 1991 and 1992. The Philippines then returned to the international voluntary markets after more than a decade.
To sustain the momentum, revenue performance was boosted by the implementation of new revenue measures in 1993. In 1994, the documentary stamp taxes and the stock transaction tax were adjusted upward. The VAT was expanded to cover services replacing the complicated system of gross receipts taxes imposed on this sector.
In addition to these reforms, anti-tax evasion laws were passed including the increase in penalties and removal of restraints on the swift disposition of smuggling cases. The import inspection scheme conducted by SGS was made comprehensive, expanding its coverage to all ports and effectively removing the minimum value of import shipments for inspection. Arrangements were made with the judiciary to assign tax courts for the speedier disposition of tax cases. The BOC also computerized its major ports resulting in faster disposition of cargoes and assessment of tax liabilities.
In 1994, the National Government posted a budget surplus of P16.3 billion, the first in 20 years. The budget surpluses were sustained for the next three succeeding years.
What lies ahead towards the new millennium?
Major reforms are expected to be carried out after the DOF spearheaded the creation of the Comprehensive Tax Reform Program (CTRP), a tax system that is simpler, less susceptible to the tax collector's discretion, broader in coverage, more equitable to taxpayers and neutral in resource allocation.
Government hopes to improve the efficiency of tax collection by further computerizing the Bureau of Internal Revenue and Bureau of Customs, continuing the privatization program, introducing a medium-term expenditure framework and reducing the share of the budget going to government-owned and controlled corporations.
The National Government expects that budgetary transfers to local government units (LGUs) will be improved by enhancing the Internal Revenue Allotment formula, monitoring LGU funds, and rationalizing the LGU grant system.
Analysts say the future is bright for the Philippines. "We have started reforms to enhance revenue collection," they say, noting that the government is also veering away from expenditures that can be shouldered by the private sector.
The government intends to accumulate more surpluses rather than deficits, pay more debts and push for more structural reforms in trade, power, investment and financial sector.
Linkback:
https://tubagbohol.mikeligalig.com/index.php?topic=32610.0
