An empirical forecasting model of government revenue for the Philippines
Date
1980-10
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
Abstract
The objective of this paper is to generate an empirical model for forecasting tax collections in the Philippines which can be very useful for better fiscal planning and management. An indication of how much resources in terms of government tax revenues can be generated in the future with the existing tax structure, rates and system of administration, will provide a workable guide for setting ceilings of government expenditures. Improved debt management will also be ensured if projections of revenues are available for government planners and decision-makers. Information on the actual needs and the available resources will provide policy makers with the signal to formulate and implement new revenue reform to beef up revenues of the government. This will also avoid costly mistakes of incurring excessive debts which are more than enough to finance the development program. Furthermore, information on the available resources will also facilitate an improved
programming of government capital projects.
The study covers the period 1967-1978 and limits its discussion to the national government tax and social security collections. This paper gives detailed consideration to some of the factors likely to affect tax levels in the Philippines. The variables determining the levels of collections of specific tax components are identified and projected. Tax collections over the period 1979-1990 are projected using estimated relationships between tax collections and their determinants or bases. Two projections series are made with regard to the total taxes. One uses the regression equation which specifies per capita income, import and price as explanatory variables of total tax collections, and the other is the summation of projected collections from the different types of taxes. The former yields more optimistic results while the latter appears somewhat conservative. This result may imply that the economy might be at that stage of development whereby the presently used tax bases for the different categories of taxes might no longer be productive for the tax system to yield the necessary revenues to finance the development program.
While important gaps remain to be covered, the empirical findings of this paper suggest that tax levels which is a possible indication of the size of the public sector are importantly affected by the availability and effective exploitation of taxable bases. As the economy advances, most of other bases are likely to emerge, thus giving greater scope for increasing tax collection necessary to finance higher levels of government expenditures.