Reducing the fiscal deficit and reforming the tax system

The Honorable Jose Isidro N. Camacho
Secretary, Department of Finance
July 18, 2001

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Aside from tax administrative reforms being carried out in the BIR, we will also be proposing to congress the adoption of a modified gross income tax system. This proposal which is almost in its final form seeks to simplify tax administration, minimize the discretion of tax payers and tax examiners, broaden the tax base and make the system more equitable. It will also align the tax treatment of corporations and self-employed individuals and professionals, lower the tax rate and adjust the tax brackets for salaried individuals. We hope that congress will show the same sense of urgency and non-partisan resolve it displayed in passing the power sector reform bill last month when this proposal will be deliberated on.

On the banking sector, we will work with the Bangko Sentral ng Pilipinas to remove ourselves from the money laundering blacklist. Money laundering endangers the integrity of our financial institutions, erodes confidence in the banking system and tarnishes our image in the international community. We will support the bill on anti-money laundering which will cover proceeds of all crimes punishable under our existing laws including plunder, graft and corruption, illegal drugs and gambling, kidnapping for ransom, financial and tax frauds and smuggling activities. We will likewise support the initiatives of the BSP to strengthen its supervisory capacity.

Measures proposed by the private sector to promote the domestic capital markets will be endorsed to congress. I hope that given my investment banking background, I can very quickly work with the industry leaders to finalize the recommendations on the personal equity retirement act, investment company act, securitization act as well as new Amendments to the Securities Regulations Code. I will also be persistent in pushing for the demutualization of the Philippine Stock Exchange.

In terms of sectoral focus, we will promote growth industries that use our most effective area of competitiveness which is skilled human resource. Specifically, the sectors are Information Communication Technology (ICT) and tourism. This is in addition to the special attention to agricultural sector as I discussed earlier.

We will support the quick development of our ICT industry including the areas of hardware manufacturing, assembly, data collection, call centers, software development, e-commerce, content development and backroom operations. As you know, we have recently passed the new e-commerce law and we support the promotion of relevant information technology courses in the tertiary level and mathematics and science in basic education. The possible creation of an ICT Department is also under discussion.

Tourism, on the other hand, will involve both promotion as well as infrastructure. Our English speaking, friendly and hospitable people, not to mention our beautiful natural resources should make us competitive in this area. This will involve the provision and concentration of infrastructure in identified tourist areas. The solution of the peace and order concerns should also be conclusive.

To provide for adequate infrastructure in support of our target sectors including the decongestion of Metro Manila, we will continue to encourage the private sector participation through the Build-Operate-Transfer scheme and any of its variants. This is particularly practical for us given our fiscal constraints.

Let me now go back to the management style of this administration. As often mentioned, the Arroyo government is characterized by 'Good Governance'. But what exactly is 'Good Governance'? Allow me to share with you how I believe this government practices 'Good Governance'.

Good Governance under the Arroyo government is governance practiced with the highest level of integrity. In this regard, I wholeheartedly commend and support the efforts of Commissioner Bañez at the BIR. Mark my word, we will not relent in our drive to turn this agency into a showcase of good governance. Let this be a warning to those who think they can sabotage the efforts by going slow on collection and harassing the Commissioner. Obstructing change will only hasten their departure. I call on the business community to back us up in this crucial crusade.

Good governance under this government is governance practiced with efficiency. This is the kind of efficiency that pushes the Department of Finance's one-stop shop duty drawback center to process tax credit claims for the Board of Investments and the Bureau of Customs from 60-70 days to 30 days, or the BIR to issue the taxpayer ID number from 2-3 days to within the same day , or the Bureau of Customs to release shipments under the Valuation Classification Review Committee from within 30-60 days to 5-15 days, or the SSS to process salary loans from 17 days to 3 days, or the GSIS to process housing loans from 10 days to 5 days.

Good governance under this government is governance practiced with strong work ethics as led by President Arroyo herself.

Good governance under this government is governance practiced with competence and expertise.

Good governance under this government is governance practiced with transparency. This is a government prepared to face any public forum to explain his decisions and actions.

Good governance under this government is governance practiced with consultation just as I led the extensive public consultations for the Power Reform Bill.

Good governance under this government is governance practiced by asking for measurable and time-bound deliverables from its managers.

Good governance under this government is governance practiced with follow through. Ningas Cogon has no place in this government.

And finally, good governance under this government is governance practiced with a strong sense of urgency and the need to act or decide.

And so my friends of the Makati Business Club - we may be sailing in stormy weather but your captain and her crew are well-equipped to steer our boat to calmer waters. The boat may rock back and forth, but not to worry - I see no risk of tipping over.

As a parting word, let me share with you the wise words from a well-known international personality better known as MJ and the Company he represents. Nothing can better describe your government leadership and certainly this Secretary of Finance as this -

Just do it!

Thank you and good afternoon.