FISCAL ADMINISTRATION 1

FISCAL ADMINISTRATION

May Ann Grace A. Alday

UPOU – MPM

PM 201

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FISCAL ADMINISTRATION

Briones (1983) expounded on public fiscal administration as that which embraces

the formulation, implementation, and evaluation of policies and decisions on taxation
and revenue administration; resource allocation, budgeting, and public expenditure;
public borrowings and debt management; and accounting and auditing.

It is the management of the inflows and outflows of financial resources for

governments, educational institutions, nonprofit organizations, and other public service
entities, as well as of the activities and operations that generate revenue. Ensuring that
funds are wisely, lawfully, effectively and efficiently spent is also part of fiscal
administration.

Fiscal administration, with respect to Briones’ definition, is a continuing activity

which has several stages: 1) formulation of fiscal policy; 2) taxation and revenue
administration; 3) expenditures and budgeting; 4) public borrowing; and 5)
accountability. These stages of the finance cycle take place simultaneously and is a
never-ending cycle.

In simplest terms, fiscal administration is public finance. The administration of

finances is a fundamental component of public management responsibility. With this,
the government adopts and employs measures in managing finances through fiscal
policies.

Fiscal Policy

Fiscal policies are formulated to stabilize the economy, specifically by

manipulating the levels and allocations of taxes and government expenditures. Fiscal
measures are frequently used in tandem with monetary policy to achieve certain goals.

In the Philippines, the Department of Finance (DOF) is the government's steward

of sound fiscal policy. It formulates revenue policies that will ensure funding of critical
government programs that promote welfare among our people and accelerate economic
growth and stability.

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The DOF was founded on April 24, 1897 by the Philippine Revolutionary
Government, long before the Philippine Republic was formally established with the
proclamation of the Malolos Constitution on January 23, 1899. This has been a clear
indication that financial management, or fiscal administration for this matter, is
extremely significant for the country’s growth and progress.

In DOF’s 2011 Annual Report, the Department stressed that fiscal responsibility
accelerates the overall development process of the country by mobilizing resources for
government projects and programs, thereby spurring economic activities that create
livelihoods, investments and other opportunities.

At present, the critical tasks of revenue generation, resource mobilization and

fiscal management rest on the shoulder of the Department of Finance. This is because
the government must provide the citizenry with infrastructure, education, health and
other basic services; and the DOF must be ready with the funds for them. Likewise, the
DOF must steer fiscal programs toward an investment-friendly environment, which is
the catalyst for growth.

The other government agencies tasked with the formulation, implementation and
evaluation of fiscal policies are the Department of Budget and Management (DBM),
National Economic and Development Authority (NEDA), Bangko Sentral ng Pilipinas
(BSP), as well as Bureau of Customs, Bureau of Treasury and the Bureau of Internal
Revenue (BIR) which are all under DOF.

Taxation and Revenue Administration

The Philippine government’s main source of revenue are taxes, with some non-
tax revenue also being collected such as fees and licenses, privatization proceeds and
income from other government operations and state-owned enterprises. To finance
fiscal deficit and debt, the Philippines relies on both domestic and external sources.

Yes, the largest chunk of the government’s revenues comprises of tax collections
which are all collected by the BIR. Along with this primary function, the BIR has the
power and duty to reduce all internal revenue taxes, fees and charges; enforce all
forfeitures, penalties, and fines connected therewith; and give effect to the administered

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supervisory and police powers conferred to it by the National Internal Revenue Code
and special laws.

The National Budget

The national budget represents the mix of fiscal policies adopted by the
government. Art. VI, Sec. 29 of the Philippine Constitution provides that “No money
shall be paid by the Treasury except in pursuance of an appropriation made by law.”
This sets the basic rule for the use of government funds and establishes the need for all
government entities to undergo the budgeting process to secure funds for use in
carrying out their mandated functions, programs and activities.

The DBM focuses its efforts on deepening fiscal responsibility, enhancing the
efficiency of public expenditures, and promoting good governance.

Public Debt Management

It is the process of establishing and executing a strategy for managing the

government’s debt to raise the required amount of funding, achieve its risk and cost
objectives, and meet any other sovereign debt management goals the government may
have set.

Governments should ensure that both the level and rate of growth in their public
debt is fundamentally sustainable and can be serviced under a wide range of
circumstances while meeting cost and risk objectives.

Public debt is the total amount of debt a central government or country owes. It
is also known as national debt. The debtors can be the government, corporations or
citizens of that country. The national government’s outstanding debt hit a record-high
P6.652 trillion in 2017 due to a weaker peso as well as an increase in domestic
borrowings.

Public Financial Accountability

The Constitution of the Philippines describes public accountability as, “Public

Office is a public trust. Public Officers and employees must at all times be accountable

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to the people, serve them with utmost responsibility, integrity, loyalty and efficiency, act
with patriotism and justice and lead modest lives.”

Public financial accountability is promoted primarily through the conduct of

regular audits as well as through the adoption of formal mechanisms that ensure
accountability and promote aggregate fiscal discipline. These mechanisms include the
key government agencies mentioned above. However, playing a crucial role in public
financial accountability is the Bureau of Treasury (BTr).

The functioning of the BTr illustrates how the combination of formal mechanisms,
media, civil society, and leadership can bring about financial accountability in the
Philippines. The department also employs Information and Communications
Technology (ICT) in promoting and ensuring accountability.

The Arrival of TRAIN

The DOF, using the hashtag #TaxReformNow, provided a glimpse of its proposal
on tax reforms in its website. From the overview, the Department insinuated that the
Tax Reform for Acceleration and Inclusion (TRAIN) is the first package of the
comprehensive tax reform program (CTRP) envisioned by President Duterte’s
administration, which seeks to correct a number of deficiencies in the tax system to
make it simpler, fairer, and more efficient.

It is further stressed that with the TRAIN, the rich will have a bigger contribution
and the poor will benefit more from the government’s programs and services. The key
reforms brought about by TRAIN Law are (1) lowering the personal income tax, (2)
simplifying the estate and donor’s tax, (3) expanding the value-added tax base, (4)
increasing the excise tax of petroleum products, (5) increasing the excise tax of
automobiles, and (6) imposing excise tax on sweetened beverages.

The TRAIN is, by far, the foremost and most significant reform on public fiscal
management by the Duterte administration.

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FocusEconomics (2018) reported that data for the first quarter of 2017 indicates
economic activity has continued to expand robustly. The growth of the economy was
backed up by a strong labor market, rising remittances and a sustained expansion in
consumer credit. Households have been said to benefit from increased disposable
income from the income tax cuts contained in the TRAIN. However, the manufacturing
sector could be seeing some weakness as it is restrained by higher excise taxes on
various goods under TRAIN. Concerns over the transitory impact of TRAIN on
consumer prices and thus on consumer demand also drove business confidence to
decline, although it remained broadly optimistic. Data for the first two months of 2018
shows a jump in tax collection due to TRAIN, which will translate into higher resources
for infrastructure plans.

Critique

The BIR, alongside other government agencies, continue to conduct massive

briefings, trainings, and workshops on TRAIN Law even prior to its approval last
December 19, 2017. All these efforts have been exerted by the government to
enlighten the Filipinos on the hefty benefits and advantages of the law’s implementation
and to perhaps implore for greater support and acceptance.

The guaranteed higher take-home pay of employees was somehow enjoyed by

the Filipinos; however, this decrease in income taxes was accompanied by
corresponding increases in excise taxes, etc. which affected fuel prices and electric bills
thereby offsetting the gains that were received from the decrease. TRAIN may have
negatively impacted the livelihood of some Filipinos, especially the low-income earners
and the poor but the government devises ways to protect them through mandated cash
transfers to the poorest 10 million households.

This signed law was only the first of five tax reform packages to be enforced by
the incumbent administration aimed to support the President’s priority social and
infrastructure programs under the “Build, Build, Build” program. As the DOF avowed,
“With the people’s support and understanding, all these reforms will result in more and
better jobs, lower prices, and a brighter future for every Filipino.”

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References

Besing, D. T. (2012, September). Philippine Public Fiscal Administration. Retrieved from

https://www.slideshare.net/daisybesing/fiscal-administration-history-overview-
definitionlgubudget-process-by-daisy-t-besing-mpa

Briones, L. (1999). Public Financial Accountability for Integrity and Results: The Case of

the Philippine Bureau of the Treasury. Asian Development Bank. Retrieved from

http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.177.3627&rep=rep1&ty
pe=pdf

Cabo, W. (1997). Theory and Practice of Public Administration. Diliman, Quezon City:
UP Open University.

Department of Finance. (2017, December). The Tax Reform for Acceleration and
Inclusion (TRAIN) Act. Retrieved from https://www.dof.gov.ph/index.php/ra-
10963-train-law-and-veto-message-of-the-president/

Department of Finance. (2012). Governance and Fiscal Responsibility for Inclusive

Growth: 2011 Annual Report. Retrieved from https://www.dof.gov.ph/wp-
content/uploads/2015/07/DOF_AR_2011.pdf

Department of Finance. (2018). Who We Are. Retrieved from

https://www.dof.gov.ph/index.php/about/who-we-are/

Department of Finance. (2018). #TaxReformNow: Department of Finance’s Proposal

on Tax Reforms. Retrieved from http://www.dof.gov.ph/taxreform/

de Vera, B. (2018, January). Gov’t’s outstanding debt in 2017 hits record-high of P6.652
trillion. Inquirer.Net. Retrieved from http://business.inquirer.net/244982/
government-outstanding-debt-weaker-peso-domestic-borrowings-economy-
treasury

Medinaceli, L. & Golla, D. (2014, July). Public Fiscal Administration. Retrieved from
https://www.slideshare.net/luisa1971/fiscal-administration-2-ppt
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Public Debt in Philippines. (2018). FocusEconomics. Retrieved from https://www.focus-

economics.com/country-indicator/philippines/public-debt

Samonte, K. (2011, November). Public Fiscal Administration: Public Borrowing.

Retrieved from https://www.slideshare.net/KarenAlanSamonte/public-debt-
philippines

Wikipedia contributors. (2018, January 8). Bureau of Internal Revenue (Philippines). In

Wikipedia, The Free Encyclopedia. Retrieved from
https://en.wikipedia.org/w/index.php?title=Bureau_of_Internal_Revenue_(Philippi
nes)&oldid=819260363

Wikipedia contributors. (2018, March 5). Fiscal policy of the Philippines. In Wikipedia,
The Free Encyclopedia. Retrieved from https://en.wikipedia.org/w/index.php?
title=Fiscal_policy_of_the_Philippines&oldid=828882135

Wikipedia contributors. (2018, March 7). Department of Budget and Management

(Philippines). In Wikipedia, The Free Encyclopedia. Retrieved from
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