Press Release
January 8, 2007

HIGH CUSTOMS REVENUE DUE
TO BIGGER IMPORTATIONS -- Pimentel

Senate Minority Leader Aquilino Nene Q. Pimentel, Jr. (PDP-Laban) said today that the collection of higher customs revenue this year was due to bigger importations, especially of mineral fuels and petroleum, while domestic production from manufacturing declined further.

We must not give undue credit to the Bureau of Customs in exceeding its target of customs collections because it is due to higher importations, especially of mineral fuels, lubricants, petroleum oils and related products, Pimentel said.

Citing the latest report of the National Statistics Office (NSO), Pimentel said that imports of mineral fuels, lubricants and related materials posted the highest positive growth of 49.8 percent among Philippine imports from January to October 2006. Imports of these products rose to $583.58 million during the 10-month period in 2006 over the previous level of $389.71 million.

The NSO said that the increase was due to the high volume of importation of crude petroleum, fuel, motor spirit and other heavy petroleum oils.

According to Pimentel, the BoC collections benefited from this surge in importation of almost 50 percent through the collection of higher Value Added Taxes (VAT) and excise taxes on a much bigger volume than the previous years. On the other hand, the Bureau of Internal Revenue was deprived of its VAT and excise collections from petroleum products when the Caltex refinery in Bataan, which used to process crude oil, was closed down. Refined products from the Bataan refinery were being imposed internal revenue taxes collectible by the BIR. A lower amount of treasury bills was also issued by the Bureau of Treasury, resulting in less collections of interest income from this source.

On the other hand, Pimentel lamented, the volume of production index for the domestic manufacturing industry dipped further by 11.2 percent in October 2006 compared with the year-ago figure. This was due to declining factory output in 10 of the 20 major sectors, with two-digit decreases in machinery, textiles, petroleum products, tobacco, non-metallic mineral products, food manufacturing, footwear and wearing apparel, transport equipment and rubber. In contrast, total foreign-made merchandise grew by 9.2 percent.

According to Pimentel, the steep decline of domestic manufacturing and trade resources from which the BIR can collect internal revenue taxes can be blamed for its failure to meet its nominal revenue target for 2006. With gross domestic product growing only by about 5.5 percent, how can we expect internal revenue taxes to grow by 25 percent which is the difference between the 2006 and the 2005 revenue goal? Pimentel observed.

Pimentel pointed out that these figures mean the further structural deterioration of the Philippine economy because de-industrialization means becoming more import-dependent. The decline of manufacturing activity in our country means lesser jobs in domestic industries, and a greater pressure for many of our people to abandon their families here and leave for jobs abroad.

According to Pimentel, the expected 5.5 percent growth in the Gross Domestic Product 2006 is insufficient to make much of a positive impact on the Philippine economy, considering the huge public debt which already draws more than a third of the national budget for payment of principal and interests, while the population grows and infrastructure and health services are neglected in payment of the foreign and local debt. The administration cannot boast about its economic achievements in the past year, especially when we compare our economic growth with neighboring countries like Vietnam with a nine percent GDP growth and China with 10 percent. Even our local economists admit that you need a 7 percent growth to take off to the level of a Newly Industrialized Country, Pimentel said.

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