Thesis Body

Westmead Intenational School
School of Economics, Business and Accountancy
CHAPTER I
THE PROBLEM AND ITS BACKGROUND
This chapter presents the problem, the formulated hypotheses, the scope
and limitation, the significance of the study and the definitions of terms.
Introduction
The Bureau of Customs (BOC) is known as one of the revenue generating
arms of the Philippine government. Having significantly contributing to
approximately fifteen per cent (15%) of the total national revenue, the BOC today
transcends its role from the traditional revenue collector to an emergent partner
in nation building. Operating in the waterfront as the border and control agent,
the BOC is mandated under Republic Act (RA) No. 10863 with a threefold
mission: revenue collection, trade facilitation, and trade border protection.
While enjoying its position as the second biggest revenue generating arm
next to the Bureau of Internal Revenue (BIR), the BOC steers to help fund the
government‟s economic and social development programs. These programs
include: the Public-Private Partnership program, now reformed as the Build,
Build, Build program of President Rodrigo Duterte; the pro-people programs
including the free tertiary and secondary education, health, security, safety,
housing projects and other numerous assistance given to the Filipino people,
An Analytical Study on the Collection Performance of the Bureau of Customs:

Fiscal Year 1987-2017
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especially the poor. Through these, the BOC serves as a pillar of the country‟s
economic recovery, the protector of the Philippines safety and security, and the
preserver of the country‟s environment and natural resources.
However, there were certain years in the history of the BOC collection
performance where the agency failed to meet its collection targets. As reported,
such failures were due mostly to the changing economic and social condition in
the country. The researchers, who will become part of the BOC, directly or
indirectly, after finishing their college education, were prompted to analyze the
collection performance of the agency. They believe that by studying the BOC
collection performance from the year 1987-2017 would provide a better insight on
how the agency‟s collection performance is being affected or challenged taking
into consideration the gross domestic product (GDP), interest rate, exchange
rate, inflation rate, and import and export growth as the macroeconomic
variables. It was in this articulation that they could forecast the agency‟s target
collection twenty (20) years thereafter.
Statement of the Problem
The main thrust of the researchers is to conduct a study about the status
of the revenue collection of the Bureau of Customs for the fiscal year 1987-2017.
Specifically, this study seeks to answer the following questions:

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1. What is the profile of the Bureau of Customs for the fiscal year 1987-2017
relative to:
1.1 Actual revenue collection;
1.2 Value of imports and exports; and
1.3 Balance of trade?
2. What are the effects of the chosen macroeconomic factors on the following:
2.1 BOC collection performance for the fiscal year 1987-2017;
2.2 Value of imports;
2.3 Value of exports;
2.4 Balance of trade?
3. Which among the factors has the least and the greatest effect on the collection
performance of the Bureau of Customs for the fiscal year 1987-2017?
4. What is the forecast revenue collection of the Bureau of Customs for the next
twenty (20) years?
Hypothesis
The researchers tested this hypothesis:
The chosen macroeconomic indicators as foreign exchange rate, inflation
rate, interest rate, gross domestic product, import growth rate and export growth
rate have no significant effect on the collection performance of the Bureau of
Customs for the fiscal year 1987-2017.

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Scope and Limitations
This study covers the collection performance of the Bureau of Customs for
the fiscal year 1987-2017 measured according to its actual revenue collection,
value of imports and exports, and balance of trade. The thirty (30) years data
were taken from the Statistical Analysis Division under the Finance Service of the
Bureau of Customs, Port Area, Manila.
The strength of the Bureau of Customs collection performance is analyzed
according to the chosen macroeconomic indicators as foreign exchange rate,
inflation rate, interest rate, gross domestic product growth rate import growth rate
and export growth rate. Discussion on which has the least and greatest effect on
the collection performance of the Bureau has been limited to the aforesaid six (6)
macroeconomic indicators.
To analyze the trend of the collection performance, the study uses
secondary type of research wherein the primary concern is to present and
analyze the profile of the Bureau of Customs based on its actual collection; the
value of imports versus the value of exports; and the balance of trade for the past
30 years. Furthermore, the study presents a 20 year forecast of the Bureau of
Customs revenue collection target however; the forecast is based and shall be
limited only on the data provided by the Philippine Statistics Authority as of
August 31, 2018.

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Significance of the Study
The proponents believed that the results and findings of conducting this
study may provide valuable and significant information about the collection
performance of the Bureau of Customs and may be beneficial in view of the
following considerations:
The presented literature and analysis may be used as guide for the
Bureau of Customs by revealing the macroeconomic indicators that have least
and greatest effect on the collection performance, the findings might be used as
basis to enhance further the revenue collection of the Bureau;
Moreover, the results of the study may provide baseline information on the
status of the collection performance of the Bureau of Customs. Output might be
used as reference materials to be kept in the school library of Westmead
International School for research purposes;
In addition, the study is beneficial to BS Customs Administration students
for this may be used as an avenue for future undertaking using the same field of
study. Likewise, they may use the study as driven when they venture in the
government service.
Finally, the study benefits the present researchers for having a closer look
on the collection performance of the Bureau of Customs to broaden their
knowledge on the issues affecting the performance of the Bureau and how the

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macroeconomic indicators affect the increased and decreased of the revenue
collection.
Definition of Terms
For better understanding of the study, the following terms are defined both
conceptually and operationally:
Actual Revenue Collection. The term “revenue” refers to income derived
from the regular system of taxation enforced under authority of law or ordinance,
and as such, accrues more or less regularly every year (Sec. 306(m), Chapter 1,
Title Five - Local Fiscal Administration, Book II Local Government Code of the
Philippines). As used in this study, actual revenue collection refers to the actual
income collected by the BOC from the various Customs Districts in the
Philippines for the period 1987-2017, which income was derived from the duties,
taxes and other charges paid on both import and export goods.
Balance of Trade. As the official term for net exports that makes up the
balance of payments, the term refers to the difference between the value of
goods and services exported out of a country and the value of goods and
services imported into the country(The Library of Economics and Liberty, 2018).
In this study, the term refers to the net exports of goods as among the basis to
present the profile of the Philippine Bureau of Customs.

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Bureau of Customs. The term refers to the Philippine government
agency under the Department of Finance that is mandated by law to collect
lawful revenues from the imported cargoes entering the Philippine customs
territory (Customs Modernization and Tariff Act, 2016). In this study, the term is
interchangeably referred to with Bureau, BOC and Customs which served as the
subject of the study.
Export. The term refers to goods or services send across national
frontiers for the purpose of selling and realizing foreign exchange (Koirala, n.d.).
In this study, the term is used with the words value to denote value of exports
and level to denote level of imports.
Fiscal Year. The term refers to an accounting year that is essentially a
customized 12-month period used for accounting purposes (The Motley Fool,
2018). In this study, the term is used as the time frame of the 30 years collection
performance of the Bureau of Customs, i.e., from 1987-2017.
Foreign Exchange Rate. The term refers to the price of the domestic
currency stated in terms of another currency; or the conversion rate of one
currency into another, the height of which, depends on the local demand for
foreign currencies, and their local supply, country‟s trade balance, strength of its
economy, and other such factors ( Chen, 2017). In this study, the term is used as
among the macroeconomic factors deemed affecting the revenue collection

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performance of the Bureau of Customs from 1987 to 2017.
Import. The term refers to a good or service brought into one country from
another. Import consists of transaction in goods and services (sale, barter, gifts
or grants) from non-residents to residents (Koirala, n.d.). In this study, the term
is used with the words value to denote value of imports as one of the profile of
the Bureau of Customs.
Inflation Rate. The term refers as the rate a price rises, and essentially
how much the dollar is worth at a given moment with regards to purchasing
(Fiorillo, 2018). In this study, this refers to a quantitative measure of the rate at
which the average price level of goods and services in an economy increases
over a period of time and is used as variables to evaluate the collection
performance of the BOC.
Interest Rate. The term refers to the amount charged, expressed as a
percentage of principal, by a tender to a borrower for the use of assets (Kagen,
2017). In this study, the term interest rate is used as one of the determinant to
assess the collection performance of the BOC.

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CHAPTER II
REVIEW OF RELATED LITERATURE
This chapter presents the conceptual and research literatures reviewed by
the researchers and were found relevant to the present study.
Conceptual Literature
The concepts taken from the readings are presented in a sequence
beginning with the nature and characteristics of, and the role performed by, the
Bureau of Customs (BOC) being one of the revenue generating arms of the
Philippine government; the issues and concerns contributory to the varying trend
in collection performance of the BOC; and the impact of selected macroeconomic
factors to the collection performance of the Bureau.
The Bureau of Customs’ (BOC) Nature, Characteristics and Role in
Revenue Collection. Technically, customs administration all over the world
served as the “gatekeepers”, taking jurisdiction on anything and or everything
that is moved across the borders and serving as tax collectors, border
controllers, port managers, and immigration agents all at the same time. The
primary tasks of customs administration relate to the movement of goods which
include protection against terrorist activities; the enforcement of sanitary and
phytosanitary restrictions, of rules relating to endangered species and intellectual

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property rights; the implementation of exchange restrictions; checking for
movements of large quantities of cash suggestive of money laundering and the
collection of revenues from import tariffs and export taxes (Keen, 2003).
For the past 117 years, the Philippine Customs Service, which was created
under Philippine Administrative Act No. 355 dated February 6, 1902, had been
the official collection agent of all revenues from imported goods. Series of
amendments took place in the history of the Philippine Customs Service
including reorganizations in its structure that finally transformed into now is called
the Bureau of Customs (BOC) under the supervision of the Department of
Finance by virtue of Executive Order No. 127, the law that strengthen the
organization, power, functions and jurisdiction of the Bureau. However, the
primary function of collecting trade-related revenues and managing the country‟s
borders for security reasons remained the foremost concern of the Bureau.
In line with the collection and border control functions, the Bureau
operates in three (3) major ports, fourteen (14) provincial ports and thirty-nine
(39) sub-ports in key locations in the country (BOC Annual Report, 2011). The
history of tax collection of Customs, dates back 110 years ago, has recorded
significant contribution, approximately fifteen per cent (15%) of national revenue
and continuously increasing up to today (National Tax Research Center Tax
Research Journal, 2011).

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According to Widdowson (2012), the responsibilities of customs
administration in a country are different from the other country based on the
constantly changing world. This is generally achieved through the implementation
of a diverse range of service level agreements, with Customs having regulatory
responsibility at the point of importation and exportation. Such border
management responsibilities stem from the more traditional customs role of
collecting duties on internationally traded commodities, a common extension of
which is the collection other forms of tax, such as Value Added Tax (VAT) and
excise duties.
In many developing and least developed countries, import duties and
related taxes represent a significant proportion of the national revenue. Because
of this, the main focus for their customs authority is, understandably, revenue
collection. In developed countries, on the other hand, with relatively little reliance
on imports as a source of government revenue, there is an increasing focus on
border protection, with particular emphasis on the enforcement of import and
export prohibitions and restrictions, including those arising from Free Trade
Agreements. Nevertheless, the current trend towards global free trade and the
recent heightening of international terrorism concerns have seen border security
emerge as a priority across all economies (Cadacio, 2012).

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The Issues and Concerns Contributory to the Varying Trend in
Collection Performance of the BOC. For the past thirty (30) years, there were
some political and economic issues that affect the importation and exportation of
goods in the Philippines and created a domino effect to the revenue collection of
the Bureau of Customs. Some of them are the laws and programs that are
conducted and promulgated by the different Presidents from the year 1987-2017.
The 1986 People Power Revolution that put Corazon Aquino to Philippine
Presidency (1986-1992), paved the way to the enactment of 1986 Tax Reform
Program (TRP) to simplify the tax system and to make revenues more
responsive to economic activity (Dohner and Intal, 1989). One of the major
reforms introduced was the ten per cent (10%) Value Added Tax (VAT)
collectible from all goods imported into the country. The 1986 tax reform program
resulted in reduced fiscal imbalance and higher tax effort in the succeeding
years, peaking in 1997 prior to the enactment of the 1997 Comprehensive Tax
Reform Program (CTRP). As cited in the work of Binay and Raguro (2017) the
introduction of Built-Operate-Transfer Law, Foreign Investments Act, and the
Consumer Protection and Welfare Act, all contributed to growth of the Philippine
economy.
The economic growth and stability experienced during the Ramos
administration (1992-1998), likewise enliven the revenue collection performance

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of the Bureau of Customs setting its annual target versus actual collection to an
average of 20%. Through his Philippine 2000 program, Ramos was able to
establish foreign relations with many countries giving more opportunities for
Philippine market both in the home and foreign countries. In his time, the
Philippines became more open to foreign trade, investments and trade relations.
This flourished Philippine membership to various free trade associations like
ASEAN, APEC and WTO, among others (Philippine Daily Inquirer, 2015).
The Ramos regime further gave attention to import liberalization and tariff
reduction, thus enabling domestic firms, of any size, to have access to least-cost
imported inputs such as capital equipment, spare parts and components. The
reduction of tariff through Executive Order No. 470 aided the domestic traders
until the target import liberalization of a uniform five per cent (5%) was reached
(Canlas, 2007). In order to intensify foreign businesses in Philippine market, he
then introduced the “buy Filipino movement” encouraging the use of Filipino
made products above imported ones. As a result, according to Canlas (2007),
growth rate of gross exports expanded nearly five times (5x) from 1992 to 1997,
thus, stabilized the exchange value of the Peso against the US Dollar.
Another milestone in the Ramos regime was the introduction of Customs
Modernization Program, which according to Parayno (2004), aimed initially to
plug revenue leakages. Later, this program was broadened through a “Blueprint

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for Customs Development” to cover other objectives such as: a better business
and investment environment; protection to public health and the environment;
and a streamlined bureaucracy. In the process, extensive use of information and
communication technology (ICT) was a major strategy to advance customs
processes ahead of arrival of cargo, automate processes and minimize human
intervention. This program contributed to the height in the revenue collection of
the Bureau, though, was slightly affected by the Asian Financial Crisis in 1997
that devalued the Philippine Peso causing a dropped due to fiscal deficit.
However, the expansion of exports enabled the Philippines to elude the painful
impact of the 1997 Asian turmoil.
The initial year of Estrada administration (1998-2001) was characterized
by a strong economic team, however, the latter part was a scenario of cronyism,
incompetence, graft and corruption, economic mismanagement, and “midnight
cabinets” composed of “drinking buddies” who influenced the decisions of the
daytime cabinets (Hays, 2015). All these phenomena lost the confidence of
foreign investors, thus worsen the Asian Financial crisis, the El Niño
phenomenon, and poverty. In addition, graft and corruption became a rampant
issue in the Bureau of Customs, thus, resorted to abrupt shifting in the
management of the Bureau, but still, tremendously affect the revenue collection.
Indeed, Estrada administration took a heavy toil on the Philippine economy:

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unemployment worsened, the budget deficit grew, and the currency fell; the
targeted revenues were not reached, policy implementation was too slow and the
fiscal adjustments were not efficiently conceptualized and implemented. These
disasters were worsened by the “jueting” controversy which gave rise to a new
EDSA Revolution putting Estrada to jail. Eventually, the economy recovered but
at a much slower pace than its Asian neighbors (Binay and Raguro, 2017).
The period 2001-2009 under the Arroyo Administration marked a Philippine
economy that is more vulnerable to rampant monopolies due to its liberalization,
deregulation, and privatization policies coupled with problems in employment as
the regime recorded the longest period of unemployment. This was brought
about by controversies affecting investment as well to name: the hello “Garci”
controversy, the Oakwood Mutiny, the Proclamation 1017, the NBN-ZTE
controversy in April 2007, and the Gloria Arroyo‟s expensive dinners. On the
other hand, this was a period of good growth rates simultaneous with the USA,
probably due to the emergence of the Overseas Filipino Workers (OFWs). Her
administration eventually put in place the 12 % E-VAT to increase tax revenue
and address the large fiscal deficits (Yap, 2003).
Other issues believed to have possible effect to revenue collection
performance of the Bureau of Customs are the WTO Customs valuation system;
free trade area, tax holiday or tax exemption privilege granted to several firms,

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specifically exporters; duty and tax exemption privilege enjoyed by individuals
under the tariff and customs law; zero tariff and reduction of tariff rates as a result
of various trade agreements or concessions of which the Philippines is a
member; smuggling, either outright or technical, as practiced by some dishonest
stakeholders; and graft and corruption in the Bureau of Customs (BOC, Annual
Report 2012). Corollary to these, the government launched various programs to
counteract the issues. Among which include, the implementation of Run After the
Smugglers (RATS) program; the adoption of X-Ray Inspection (XIP) project both
to control smuggling or any practice of misdeclaration and observe a non-
intrusive examination to avoid physical contact over imported goods; and the
computerization of the Bureau‟s transaction through the so-called electronic to
mobile (e2m) Customs project. Transparency in the Bureau, selectivity approach
under the risk management system, and post clearance audit. All these
measures were posted to address the rampant smuggling activities in the
country, and to ensure effective collection of government revenue.
The administration of Benigno Aquino III (2010-2016) brought new
meaning to transparency as he required full honesty in all of his agencies
including the Bureau of Customs. A Transparency Seal for this purpose was
developed to serve as the guiding principles of the public pillars in serving the
people in general, in addition to its identified vision, mission and goals.

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Unlike his predecessors, who all created special bodies and presidential
task forces to help the Bureau curb smuggling and other violations of the Tariff
and Customs Code: Economic Intelligence and Investigation Bureau (EIIB)
created under the Administrative Code of 1987 under Cory Administration;
Presidential Anti-Smuggling Task Force under the Office of the President (OP)
and the Presidential Task-Force Aduana, both were spearheaded by the Estrada
administration; the Anti-smuggling Intelligence and Investigation Center of the
Arroyo Administration functioned under the Office of the President then later
improved with the creation of Presidential Anti-Smuggling Group (PASG) under
EO 624, all geared to address the rampant smuggling and corruption at the BOC
and other violations of the tariff and customs laws “committed on large scale or
by criminal syndicates” (Villanueva, 2017), P-noy didn‟t create any anti-
smuggling task force instead stick to its “Tuwid na Daan” type of governance
within the Bureau.
The comprehensive Customs Reform Program encompassed a major
policy reform initiated with the goal of improving checks and balances in the
Bureau; the adoption of the Revised Kyoto convention for better trade facilitation
and customs best practices; the enforcement of the post entry audit and most
importantly, the implementation of Republic Act No. 10863 otherwise known as
the Customs Modernization and Tariff Act (CMTA) which took effect immediately

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after the present President of the Philippines, Rodrigo Duterte took oath of office.
In more than two (2) years‟ time now, the Bureau is bombarded with various
policies on improvements of revenue collection, protection of the economy and
protection of the business enterprise as well, against illicit traders.
In a short period of time, there were already three (3) individuals appointed
by Pres. Duterte as Commissioner of Customs. Commissioner Nicanor Faeldon
held office from June 30, 2016 to August 30, 2017; Commissioner Isidro Lapeña
from August 30, 2017 to October 30, 2018 and the incumbent Commissioner Rey
Leonardo Guerrero, from October 30, 2018 to present (Placido, 2018). The
sudden shifting in the leadership of the Bureau could have a domino effect on its
collection performance considering the disparity in strategy and approach in
meeting the target collection of the Bureau.
In addition to the cited causes which affect the BOC revenue collection
performance, there were some recorded natural phenomena that affect the
gradual increase of year-on-year growth of importations in the Philippines to
name among others: Guinsaugon landslide in 2006, the cyclone Durian,
mudslides in Legazpi City, the Bohol earthquake in 2013, and the typhoon
Haiyan (Brandlin and Wingard, 2013). These phenomena brought massive effect
not only to the lives of the Filipino people but also the import and export activities
of the country and at most, the government revenue.

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Issues relative to balance of trade were also believed necessary to clearly
diagnose the collection performance of the Bureau. Balance of trade is defined
as the difference between the value of nation‟s exports and its imports (Kenton,
2018). This means that when the value of goods leaving a nation exceeds the
value of those coming in, a positive balance of trade exists, meaning, the nation
is bringing in more money as payments for the goods; while, a negative balance
of trade exists when the value of goods coming into a country is greater than the
value of goods going out. The latter scenario is also referred to as “trade deficit”
or “unfavorable trade balance”. In relation to this, if a nation‟s currency
depreciates, according to Miller (1991), the nation will likely to export more goods
as its products become cheaper when compared to other nations. On the
contrary, if a nation‟s currency increases in value or price, the amount of its
exports will drop.
To outgrow trade deficit, most countries create trade policies that
encourage a trade surplus. Amadeo (2018) stressed that trade surplus is
favorable due to the following: gives more income/profit to a country leading to a
high standard of living; brings more capital resulting to more employment
opportunities; and gains competitive advantage by producing all export goods.
However, these moves could lead to trade protectionism through stiff laws and
regulations, levy tariffs, impose quotas and other subsidy on imports. These

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economic activities often affect international trade transaction and, hence, also
affect the revenue collection performance of the border control agency, which in
the case of the Philippines; it is the Bureau of Customs.
The Impact of Selected Macroeconomic Indicators to the Collection
Performance of the Bureau of Customs. To analyze further the collection
performance of the Bureau for the fiscal year 1987-2017, the researchers used
some macroeconomic indicators, which they believed could affect the collection
performance of the agency. These macroeconomic indicators are foreign
exchange rate, interest rate, inflation rate, gross domestic product, import growth
rate, and export growth rate.
The foreign exchange rate, as defined, is the price of one‟s own money to
acquire one (1) unit of a foreign currency and the rate at which the money of one
nation is exchanged for the money of another nation (Brue, 2009), which is
determined by the demand for, and the supply of, the foreign currency. In
international finance, the term may be broadly defined as foreign currency and
money claims express in the units of account of another country.
Miranda 2002 (as cited by Alcantara & Mercado, 2017) stated that the supply
of foreign currency in a country is derived from the demand for foreign goods.
This also affects the exchange rates considering that the supply of, and demands

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for, foreign currency determines the equilibrium price or the exchange rate of that
currency.
In a foreign market scenario, say USA, a strong dollar will lower the price of
its imports; makes trips to USA less expensive; and makes it more difficult for
foreign investors to invest in the US market. However, the net effect of rise in
import is a fall in exports. A “net export fall” arises when the value of currency
appreciates while “net export rise” when the currency depreciates.
According to Tubayan (2018) of the Business World, the Bureau of Customs
exceeds collection goal due to a weak peso, high oil prices and enforcement of
proper valuation. He added that a source from the Bureau revealed that “the
BOCs‟ improved collection performance remains consistent as it has exceeded
target for seven consecutive months, posting a revenue surplus of P2.326 billion
in August” and the Bureau attributed its “consistent high revenue performance to
the higher exchange rate, increased oil price in the market, proper valuation and
strong enforcement and revenue enhancing measures”. This means that a higher
exchange rate results to high revenue collection performance. In the same
sense, weaker peso tends to increase the value of commodity prices including
that of import prices, which lead to higher collected revenue.
Interest rate is also considered in this study as among the macroeconomic

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indicators that could possibly affect the revenue collection performance of the
Bureau of Customs. Interest rate is defined as the price paid for the use of
money, or the amount charged by a lender to a borrower for the use of assets . It
is normally expressed as a percentage of the principal. Further, interest rates are
typically expressed as an annual basis, known as the annual percentage rate
(APR) imposed on assets borrowed including cash, consumer goods, vehicles
and buildings (Kagen, 2017).
The Central Bank usually increases interest rates when inflation is predicted
to rise above its inflation target. Higher interest rates tend to moderate economic
growth. These increase the cost of borrowing, reduce disposable income, and
therefore limit the growth in consumer spending; higher interest rates tend to
reduce the rate of economic growth and inflationary pressures (Unknown Author,
2016).
Increase the cost of borrowing tends to discourage people from borrowing.
Higher interest rates make it more attractive to save in a deposit account
because of the interest gained. Further, higher interest rates increase the value
of a currency, thus reducing exports while increasing imports. Therefore the
company is likely to experience falls in consumption and investment. This implies
that interest rates affect consumer and business confidence. Thus, a rise in

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interest rates discourages investment; it makes firms and consumers less willing
to take out risky investments and purchases.
Corollary to the scenario above, the higher interest rates reduce spending on
imports that could possibly affect the revenue collection performance of the BOC.
In connection to the aforementioned statement, inflation rate, as defined in the
accounting dictionary published in 2018, is the percentage at which a currency is
devalued during a period. In other words, it is a rate at which the currency is
being devalued causing the general prices of consumer goods increases relative
to change in currency value. It is the per cent increase in prices during a
specified period.
On the other side, inflation occurs when prices rise over a designated time
period. As further defined, inflation is a rise in the general level of prices (Brue,
2005); is a quantitative measure of the rate at which the average price level of
goods and services in an economy increases over a period of time (Chen, 2018);
is a sustained increase in the price level of goods and services over a certain
period of time. Noticed in the definition that increase in prices occurs over a given
or certain period of time. This means that inflation is temporary (Rosario, 2018).
Inflation reduces the purchasing power of money but it does not mean that all
prices are rising. There are certain instances that while in the course of rapid
inflation, some prices are relatively constant while others are falling.

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Based on an interview conducted by Galang (2017), Finance Secretary
Carlos Dominguez stressed that peso devaluation increases government tax
collections more than it pushes up expenditures. A decline in the peso exchange
rate is a “net gain” for the government, he added. However, according to Hindu
Finance Minister Pranab Mukherjee at a conference in New Delhi dated May 24,
2011, “the government could miss the revenue collection targets during 2011-12
mainly on account of high inflation and moderating economic growth. This was
supported by Hindu Revenue Secretary Sunil Mitra saying that “inflation can
affect domestic demand and thereby adversely affect GDP growth…. and
consequently our tax collection” (Unknown Author, 2011). The inflation rate in
this sense could bring both positive and negative impact to government tax
collection, which in the case of the Philippines, it is the Bureau of Customs‟
revenue collection, Peso depreciation would discourage imports, and since it is in
imports that the Bureau is collecting tax in the form of customs duty, excise tax
and value added tax, then low level of imports could lead to below performance
in government tax collection.
On the other hand, the Philippine inflation rate, for example, correlates with
the global price of crude oil and the Philippine Peso-US Dollar exchange rate.
Any movement in the global oil prices has a domino effect to the Philippine oil
prices including prices of commodities and other services in the country. As

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already emphasized, an increase or decrease in the import level of commodities
will affect the collection performance of the BOC in the sense that, when the
inflation rate is high, there is less import and less revenue collection. On the
contrary, low inflation rate tend to have high import thus higher revenue
collection.
According to Amadeo (2018), gross domestic product (GDP) refers to
production during a particular time period usually a year or quarter of a year.
According to Remo (2004), the flow of new products during the year or quarter of
a year measured in dollars; and an indicator to gauge the health of a country‟s
economy or the size of economy. In general, It is the total value of everything
produced by all the people and companies in the country whether they are
citizens or foreign-owned companies as long as they are located within the
country‟‟s boundaries.
The components of GDP include Personal Consumption Expenditures plus
Business Investment plus Government Spending plus (Exports minus Exports),
using the standard formula: GDP = C + I + G + (X-M). The GDP impacts personal
finance, investments, and job growth. Investors look at the growth rate to decide
if they should adjust their asset allocation. They also compare country growth
rates to decide where the best opportunities are. Most investors like to purchase
shares of companies that are in rapidly growing countries (Amadeo, 2019).

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Governments play a huge role in a nation‟s economy. One way economists
measure the size and economic impact of the government is with the ratio of total
revenue to gross domestic product. This ratio is useful for assessing the current
and future implications of revenue and economic growth as they affect fiscal
policy (Adkins, 2017). Total revenue tends to grow as GDP grows. Conversely,
when there is an economic downturn, revenues usually decrease. This becomes
important when total revenues are compared to government spending. If
spending increases at about the same rate as economic growth and the total
revenue/GDP ratio remains constant, the overall size of government stays about
the same as a proportion of economic activity. However, if spending growth
outpaces increase in total revenues, the government will eventually be force to
borrow money, raise taxes or cut spending.
GDP is looked as the nation‟s revenue (Koh, 2014). It measures the value
of economic activity within a country. Strictly defined, GDP is the sum of the
market values, or prices, of all final goods and services produced in an economy
during a period of time (Reji, 2015). When GDP growth is strong, firms hire more
workers and can afford to pay higher salaries and wages, which lead to more
spending by consumers on goods and services (Jordaan, 2013). Therefore, a
rising GDP simply means that the economy is in good shape and the nation is

26
moving forward; whereas, if GDP is falling, the economy is in trouble, and the
nation is losing (Smith, 2018).
Looking into the effect of GDP on the revenue collection performance of
the Bureau of Customs, records of the Fiscal Incentives Review Board show that
government incentives in the forms of tax and duty exemptions on various
imports, those granted to firms registered with the Board of Investments, and the
firms registered with Philippine Economic Zone Authority (PEZA) and such other
Zone authorities affect the GDP of the country and the performance collection of
the BOC as well. Because of the exemption privileges granted to these firms,
even if the economic activity flourishes may not necessarily mean that there will
be an increase in the collection performance of Bureau. This situation has a
domino effect to the import and export growth rate of a country (E.O. 226, 1987).
Import and export represent the two sides, or faces, of the coin of
international trade. On one side is export while import appears on the other side.
This means that in international trade transaction, the export of one country is the
import of another country. The increase in export of a country to another country
results to an increase of import of the recipient country (Customs Modernization
and Tariff Act, 2016).
Unilaterally, export and import growth rates of a country affect the revenue
collection performance of the authority. For countries like China, Korea and

27
Crimea that impose tax on both export and import goods, increase in both export
and import would probably mean increase in revenue collection (Unknown
Author, 2018).
According to Talipaga (2018), inflation affects exports primarily through its
influence on the exchange rate, higher inflation typically leads to higher interest
rates, and this leads to a weaker currency. A currency with a higher inflation rate
will depreciate against a currency with lower inflation. This means that the higher
the inflation, the weaker the currency.
As further stressed, a stronger currency can have an adverse effect on
exports and on the trade balance. Higher inflation can also affect exports by
having a direct impact on import costs such as materials and labor. These higher
costs can have a substantial impact on the competitiveness of exports in the
international trade environment (Talipaga, 2018).
All goods, when imported into the Philippines shall be subject to duty upon
importation, including goods previously exported therefrom when reimported,
shall likewise be dutiable (CMTA by Dascil, 2016). This proviso could bring more
revenue to the government through the BOC considering that more imports mean
more tax payment; contrary, the same proviso laid down certain exemption
granted by law pursuant to Section 104, Chapter 2 of the Customs Modernization
and Tariff Act (RA No. 10863, 2016). Consequently, considering that most

28
exports of the Philippines are not dutiable as provided in Section 1612 of the
CMTA (2016), therefore even if there is a great volume of exports from the
country, still, revenue collection remains low. Additionally, government tax
exemption incentives given to the exporters, Asian financial turmoil and fortuitous
events likewise add to the low collection performance on exports.
Research Literature
To further expound the subject matter, the researchers discussed herein
previous studies of various authors deemed related to the present study.
A research paper of Medrano (1999) entitled “Factors Affecting the
Revenue Collection of the BOC POB for the Calendar Year 1997”, focused on
the revenue collection of the BOC-Port of Batangas for the calendar year 1997
and reveals that the Bureau unsuccessfully reached its target collection in the
said year, because of “the increase in the amount of tax exemptions and the
reduction of tariff rates as a result of international trade agreements”. On the
other hand, the study shows that the influx of imports was the primary factor of
achieving success in the target collection as indicated on the majority of the
responses provided; other factors deemed contributing to the Bureau‟s success
of attaining the target goal were increase in the exchange of dollar to peso,
increase in the influx of high duty imports, and the additional revenue generated
from fines and surcharges. As recommended, there must be a “close monitoring

29
in the payment of duties, taxes and other charges” in order to achieve the target
revenue collection.
A study of Asi, et. al (2004) entitled “An Analysis on the Effect of the Level
of Net Export to the Money Supply of the Philippines” determines the factors
having significant effect on the level of net exports and further analyzes the
impact of the determined significant factor to the money supply of the Philippines.
The researchers found out that “foreign exchange rate and personal disposable
income” are the factors having significant effect.
With a view of determining the factors affecting the revenue collection of
the Bureau of Customs, Perez, et. al (1999) conducted a study in this field
entitled “Factors Affecting the Revenue Collection of the Bureau of Customs Port
of Batangas-Fiscal Year 1997” which aim to know the amount of the revenue
collection of the Port of Batangas for the year 1997 and the possible factors
affecting the collection. Using a documentary type of research, the researchers
found out that the influx of import is the primary factor of success in achieving the
target revenue collection.
In 2010, the study of Piong entitled “Status and Problems Encountered in the
Revenue Collection of the BOC Port of Batangas for Fiscal Year 2005-2007”
found out that the BOC-POB exceeds its target collection for the year 2005-2006
due to the “swifter submission of complete documents by the importers or

30
brokers” that resulted to speedier collection of Customs employees. However,
“lack of regular updated publication of export value” was the main contributor to
the decrease in revenue collection.
Comparatively, Recinto, et. al conducted a study in 2012 entitled “Revenue
Collection of the Bureau of Customs at the Port of Batangas for Fiscal Year
2006-2010: A Comparative Study”, focusing on the revenue collection of the
Bureau of Customs at Port of Batangas for the fiscal year 2006-2010. Their study
reveals that the BOC achieved its target collection in the year 2006 due to
exchange rate appreciation; but did not during the years 2007 up to 2010 for the
reason of low volume of importation. Because of this, “being unable to reach the
target collection”, was found to be the major problem encountered by the Bureau.
Consequently, Brotonel (2014) in the study entitled “Effects of Imports to the
Revenue Collection of the Bureau of Customs Port of Manila from Fiscal Year
2002-2012” found that the revenue collection of the BOC-POM from 2002
increases continuously until 2007, though declines in 2008-2009, it rises again
until 2012. As further revealed, the value and volume of imports constantly
change year-on-year.
Synthesis
The reviewed literature and studies guided the researchers in expanding the
concepts and theories of their study. After a thorough analysis of the presented

31
conceptual and research literature, the sites of composition in the present study
were offered. Although there are similarities observed from these studies,
differences are also recognized.
All the studies presented are deemed related to the present study
considering that they all centered on trade, import-export, and mostly on re
venue collection made by the Burau of Customs as performed by different ports
or Customs Districts in the Philippines.
The study of Asi et al. was found similar to the present research since
focus on macroeconomic factors. Asi et al. covers the effect of net level exports
to the money supply of the Philippines. The present inquiry delves on the six
selected macroeconomic indicators believed to affect the collection performance
of the BOC with regards to its revenue.
In addition, the research works of Medrano; Perez; Piong; Recinto; and
Brotonel focus on revenue collection of a specific port that represent the situs of
their respective investigation, hence, found to be related to the present study.
However, they differ in such a way that the present research covers the 17
Customs Districts of the Philippines and does consider the thirty (30) years
revenue collection performance of each Customs District, i.e., for the fiscal year
1987-2017.

32
The previous studies made used of secondary type of research, same with
the present study that uses the documentary type.
Conceptual Framework
For a better understanding of the study, the researchers provide a
conceptual framework of the study including the conceptual paradigm which
evidences the variables taken into consideration.
Independent Variables Dependent Variables
Macroeconomic Indicators Profile of the Bureau of

Affecting the Collection Customs
Performance of the Bureau of
Customs  Actual Collection
 Value of Imports and
 Foreign Exchange Rate
Exports
 Interest Rate
 Balance of Trade
 Inflation Rate
 Import Growth
 Export Growth
 Gross Domestic
Product (GDP)
Figure 1
Conceptual Paradigm
The conceptual paradigm illustrates the flow of the researchers‟ study. As
shown in the figure, the profile of the BOC represents the dependent variables as
actual collection; value of imports and exports and balance of trade seem to have

33
been affected by the macroeconomic indicators such as: foreign exchange rate,
interest rate, inflation rate, GDP, import and export growth.
The Bureau‟s total revenue collection performance is measured by the
variables illustrated. This collection records essential contributions to the growth
of the economy, thus, the law mandates that the Bureau shall collect in full all the
duties, taxes, penalties, fees, fines and other charges due to, and collectible by,
the government through the Bureau of Customs.

34
CHAPTER III
RESEARCH METHOD AND PROCEDURE
This chapter presents the research design, the data gathering instrument
and procedure and the statistical treatment of data used in the study.
Research Design
The main objective of the study is to analyze the collection performance of
the Bureau of Customs for the fiscal year 1987-2017. The Bureau‟s collection
performance is measured based on the actual collection; the value of imports
and exports and the balance of trade as recorded in the office of Statistical
Analysis Division under the Financial Service Division of the BOC. Using the
macroeconomic factors: foreign exchange rate; interest rate, inflation rate; gross
domestic product; export growth; and import growth, the researchers further
analyzed which of the chosen indicators has the least and greatest effect to the
collection performance of the Bureau of Customs.
The researchers made used of the “ex-post facto” method of research. “Ex
post facto”, a Latin phrase meaning “from what is done afterwards”, is a type of
research where the researchers manipulate the independent variables while
control the dependent variables to establish the effect of the independent to the
dependent variables (Fraenkel et al., 2005).

35
The content analysis was also employed to make replicable and valid
inferences through keen interpretation and codification of textual material. By
systematically evaluating texts (e.g. documents, oral communication and
graphics), qualitative data are converted into quantitative data (Duriau, Pferrer,
and Reger, 2007). As widely accepted, the content analysis method of study can
also be described as studying traces which are documented from the past.
Data Gathering Procedure
First, the researchers familiarized themselves with the specifics of the
problem through readings of supplementary materials such as books, journals,
theses, dissertations and other reference materials as kept in the different
libraries in Batangas City: the Westmead International School, Batangas State
University, and the LPU-Batangas. Second, they consulted the scholarly works
found in the internet and the websites of various government agencies which
they deemed helpful in the writings of the study.
The primary data involving the actual revenue collection from 1987 up to
2017 were gathered from the Bureau of Customs‟ Office of the Statistical
Analysis Division under the Financial Service Division; while data relating to the
value of imports and exports and the balance of trade information, as well as
inflation rate, GDP, export and import growth rates, were all taken from the

36
Philippine Statistics Authority (PSA). In addition, the prevailing exchange rates
for the particular years were accessed from the Bangko Sentral ng Pilipinas
(BSP) official website.
All the information were formally derived through a written communication
addressed to the respective government agencies that can provide the
necessary information in order to achieve the objectives of the researchers.
Statistical Treatment of Data
Using the Statistical Package for Social Sciences (SPSS) Version 20, the
data gathered were treated through the following statistical tools: Multiple
Regression Analysis and Single Linear Regression.
Multiple Regression Analysis is defined as a statistical technique that
simultaneously develops a mathematical relationship between two or more
independent variables and an interval scaled dependent variable. It involves a
single dependent variable and two independent variables. This was used to
determine the significant effect of the chosen macroeconomic indicators to the
collection performance of the Bureau and to obtained among which
macroeconomic indicators has the greatest and least effect on the dependent
variables.

37
The formula is:
Y= Xn
where:
Y = Dependent Variable
β = the Coefficient of the Independent Variables
Xn = Independent Variable
The Multiple Linear Regression formula for objective number 2 is:
BOCC = f( (ER)+ (INFL)+ (IR)+ (GDP)+ (EGR) + (IGR)
where:
– Bureau of Customs Collection
ER – Exchange Rate
INFL – Inflation Rate
IR – Interest Rate
GDP – Gross Domestic Product
EGR – Export Growth Rate
IGR – Import Growth Rate

38
Data were interpreted based on the following statement: A direct
relationship between the variables is indicated by a positive sign and an inverse
relationship, by a negative sign. The resulting value of the coefficients shows the
weight of the independent variables as a determinant of the independent
variable. A high of the former connotes that it is a good determinant of the latter.
To forecast the revenue collection of the Bureau of Customs in the next
twenty (20) years, Single Linear Regression analysis was used.
The formula is:
Y=
where:
Y – Forecasted statue
Intercept
X1 – year to forecast
The F-test for linear regression tests whether any of the independent
variables in a multiple linear regression model are significant. This method
indicates the goodness of the fit. The computed value, if significantly different
from zero and beyond the critical value will reject the null hypothesis.

39
The Pearson r correlation coefficient, also referred to as Pearson‟s r, the
Pearson product-moment correlation coefficient or the bivariate correlation, is a
measure of the linear correlation between two variables X and Y. This method
was used to determine how significant the foreign exchange rate, inflation rate,
interest rate, gross domestic product, import growth rate and export growth rate
to the BOC actual collection.

40
CHAPTER IV
PRESENTATION, INTERPRETATION AND ANALYSIS OF DATA
This chapter contains the presentation, interpretation and analysis of the
findings obtained from the study.
1. Profile of the Bureau of Customs Relative to Actual Collection, Value of

Export and Import and the Balance of Trade for the year 1987-2017.
The illustration of the collection performance of the BOC based on the
actual collection, value of export and import, and balance of trade is as follows:
500,000
450,000
400,000
350,000
ACTUAL COLLECTION
300,000
250,000
200,000
150,000
100,000
50,000
0
1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017
YEAR
Figure 2
BOC’s Actual Collection (1987-2017)

41
Table 1
BOC Actual Collection (1987-2017)
ACTUAL COLLECTION 1987-2017

YEAR (IN MILLION PESOS)
1987 25,997
1988 25,014
1989 38,375
1990 45,948
1991 64,391
1992 72,870
1993 81,971
1994 81,610
1995 97,601
1996 104,566
1997 94,800
1998 76,005
1999 86,497
2000 95,006
2001 99,981
2002 99,322
2003 11,201
2004 127,269
2005 154,566
2006 198,161
2007 209,439
2008 260,248
2009 220,307
2010 259,240
2011 265,109
2012 289,867
2013 304,926
2014 369,277
2015 367,543
2016 396,365
2017 258,184
Figure 2 and Table 1 show the graphical and tabular presentation of the
changes of the growth of the BOC‟s actual collection from the period 1987-2017.

42
The y-axis represents the BOC‟s actual collection in millions, while the x-axis on
the other hand represents the year from 1987-2017.
It presented an increasing trend of the revenue collection in the year 1987-
1996. It was supported by Dohner and Intal (1989) that, the Cory Aquino
Government agreed and began to implement the Tariff Reform program (TRP)
that aimed to simplify the tax system, make revenues more responsive to
economic activity. The additional revenue came from increases in taxes on
cigarettes and beer and the removal of exemptions. The elasticity of the tax
system was improved by converting excise taxes to an ad valorem basis, by
making tax rates more uniform and removing exemptions, and by plans to
strengthen collections.
In line with this, the Philippines under the presidency of Fidel Ramos
registered high growth rates and was touted as the next Asian "tiger" economy
as he transformed the Philippines from a country with a history of poverty,
corruption, rebellion, foreign ineptness and tax evasion into an economic
powerhouse that was not yet an Asian tiger but was sometimes referred to as
Asian tiger cub.
In connection with the programs and laws enacted in the Ramos
Administration (1992-1998) that resulted to the increase in the revenue collection
of the BOC were, when the Philippines flourishes its membership to various free

43
trade associations like APEC, ASEAN and open doors to the countries of the
world (Philippine Daily Inquirer, 2015 as cited by Raguro and Binay, 2017). It
reduced trade taxes and tariff on goods coming from other member countries,
(b) remove quantitative restrictions on goods and convert it into tariffs that should
decline through time, (c) reduce other non-tariff measures (NTMs), and (d)
enforce rules of origin or goods should have local content of at least 40 per cent
of the freight on board (FOB).
Based to Clarete (2004), in 1995, when the Uruguay Round Final Act of
the GATT created the World Trade Organization and Philippines is one of the
signatories on this Agreement. In line with this, it issued an Agreement on the
Interpretation of Article VII, which among other provisions mandated all its
members to adopt the transaction valuation procedure, by 2000 at the latest for
developing countries. The report discusses the challenges faced by the
Philippine government and its responses when it legally enabled this agreement.
Between 1995 and 1997, the Philippine government worked to enact R.A. 8181,
adopting the transaction valuation system in accordance with its obligation as a
WTO member to implement the customs valuation agreement at a time no later
than 2000. According to RA. No 10863, Transaction Value refers to the price
actually paid or payable for the goods when sold for export to the Philippine and
adjusted in accordance with the provision of CMTA.

44
In laying down a clear process and enjoining all its members to abide by
these rules, the WTO agreement reduces discretion, improves transparency and
makes customs valuation procedure all over the world increasingly predictable.
Accordingly, the agreement facilitates trade (Clarete, 2004).
The Philippine‟s 2000 campaign was introduced also by President Ramos
that helps the country to establish foreign relations with many countries that in
turn made the country rich because of Philippine market opening to foreign
businesses. This campaign helped the Philippine products and producers to be
known worldwide and it also helped many manufacturers to build good relations
with other countries.
Another law that enacted in Ramos government that focused on import
liberalization was the EO No. 470 that implements tariff reduction through time
until a uniform rate of five per cent. It was launched to promote internationally
competitive industries and provide quality goods at lower prices that result to the
decrease on the revenue collection in the year 1997-1998. Because the lower the
tariff imposed in the imported goods, duties to be collected by the Bureau will
decrease and resulted to lower revenue collection.
While in the year 1999-2008, figure 2 and table 1 shows an increasing
trend of the revenue collection of the Bureau that helps the economy to be more
progressive and competitive. One of the programs that were funded by Arroyo‟s

45
Administration was the computerization program of the Bureau of Customs that
improves the Bureau‟s transaction and eases the trade facilitation that results to
reach the target collection of the Bureau. The then BOC Commissioner Napoleon
Morales disclosed that he expected the Bureau to strengthened its revenue
collection drive with the use of new and updated imports valuation database and
X-ray scanning system in ports that introduced in year 2007, and the revenue of
bulk shipments in the last three years by the Bureau‟s Post-Entry Audit Group
(Chui, 2007).This new strategies and tools prevent any smuggling acts that may
result to the decrease of the revenue collection of the BOC. Because of this
strategies and tools, BOC‟s actual collection was improved and helped the
agency to reach their target collection and collect what is due to the government.
From the last quarter of 2008, when the shocks of the food crisis were felt
worldwide and fuel prices were zooming, the economies of many nations
registered recessionary tendencies and depression stumped commodity
production and led to massive unemployment, sending tremors in all the
continents, including Asia. The Bureau of Customs (BoC) has had to endure a
most difficult period for the entirety of 2009 as the economy absorbed the shocks
of the financial maelstrom that gripped the financial system worldwide. In result of
this, the year 2009 had a decline of -15.3 per cent on its previous collection
amounted to Php 260,248.00 to Php 220,307.00 (BOC, Annual Report 2009).

46
The decrease of the revenue or failure of achieving the target collection
can also be caused by the increase in the amount of tax exemptions and
reduction of tariff rates as a result of international trade agreement. Because the
rule is, when you are member of one organization you need to abide on the rules
and regulations they implement. You need to treat every member with equality
and without discrimination. The Law of Reciprocity is applied (Perez, 1999).
But in 2010-2017, the collection shows increasing slope because of the
reform conducted on the Bureau of Customs. One of the reforms was the
enhanced computerization program of the Bureau of Customs which was
electronic-to-mobile (e2m) that allows paperless transaction and removed the
face to face transaction that also help to lessen the corruption in the Bureau that
cause to the decrease of the collection of the collecting agency.
Another program was launched in 2007, that was the adoption of non-
intrusive examination which use an X-ray machine to determine the actual
content of the container by the use of the image printed out that will show if the
declared goods is similar to the goods being examined. Because of this program
it helped the Bureau to seized million/billion worth of goods that leads to the
decrease of the revenue collection of the Bureau of Customs because instead
that the BOC can get on time the duties and taxes due to the government, the

47
payment for the seized goods is delayed so that it results to the decrease in the
collection of the Bureau (BOC, Annual Report, 2011).
According to the Revised Kyoto Convention, the new Customs
Modernization and Tariff Act (CMTA) is a game changer on the role of the
Bureau of Customs which totally modified the Tariff and Customs Laws of the
Philippine under Republic No. 10863 in order to meet the demand of the
transacting public and to protect the interest of the government. This law is
aligned to the Revised Kyoto Convention that aims facilitating trade by
harmonizing and simplifying Customs procedures and practices. The Convention
provides standards and recommended practices for modern Customs procedures
and techniques. Revised Kyoto Convention is the main trade facilitation Customs
convention and an update and revision on the Simplification and Harmonization
of Customs Procedures.
According to Republic Act No. 10863, the Bureau of Customs is no longer
solely focused in the collection of revenues, but more so in border control to
prevent entry of smuggled goods, particularly illegal drugs, and facilitation and
security of international trade, and supervision and control of import and export
cargoes as mandated by law. Indeed, the Bureau is our first line of defense in
border protection. Because of this, the Bureau has the capability to protect and
secure what is due to the government and also to protect the citizen of the

48
Philippine from the entrance of smuggled goods that may harm or affects many
Filipinos.
100,000.00
90,000.00
80,000.00
VALUE OF IMPORTS
70,000.00
60,000.00
50,000.00
40,000.00
30,000.00
20,000.00
10,000.00
0.00
1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017
YEAR
Figure 3
Value of Import 1987-2017
Figure 3 shows the trend of the value of imports from 1987-2017 that
helps the agency to meet their target collection. It reveals that in the year 1987-
1990 value of imports increase in four consecutive years. It was supported by the
www.nationsencyclopedia.com that in the Aquino Administration endure many
troubles, including six coup d’etat attempts, many natural disasters like
earthquakes and the Mt. Pinatubo eruption that cause the economic activities to
stop. The country was subjected to a prolonged drought, which resulted in the
increased need to import rice and other commodities to satisfy the needs of the
citizen. To address this problem, President Aquino passed various critical laws

49
such as a Liberal Foreign Investment Act, the Comprehensive Agrarian Reform
Law, and the privatization of government corporations that brought the economy
back to its feet.
The slope value of imports continue to increase in the following years (1991-
1996) as supported by Hays (2015) that, in Ramos government when the country
became more open to foreign trade, investments and relations that results to
increase of foreign investments. Companies like Acer and Intel moved into the
Philippines. Because the more companies open to market of the Philippines,
more job opportunities are available.
According to Naplamwanit (1999), when 1997 came, a big crisis happened in
Thailand, when the Thai government, burdened with a huge foreign debt resulted
to float its baht after currency speculators had been attacking the country‟s
foreign exchange reserves. This monetary shift was aimed at stimulating export
revenues but proved to be in vain. It soon led to a contagion effect in other Asian
countries as foreign investors - who had been pouring money into the 'Asian
Economic Miracle countries' since a decade prior to 1997 - lost confidence in
Asian markets and dumped Asian currencies and assets as quickly as possible.
This Asian Financial Crisis resulted to slightly decrease in the value of imports in
the year 1997. Slightly decease, in way that the economic reforms instituted in

50
the Philippine 2000 platform would have an effect on how the Philippines would
be affected in the 1997 East Asian Financial Crisis.
On the other hand, 1998 shows the largest increase in the value of imports
and one of the caused in the remarkable increase in the value was the sudden
depreciation of the Philippine peso against the US dollar 38.9 per cent as the
average exchange rate for imports reached Php 40.036 to US$1 in 1998 from
Php 29.471 to US$1 in 1997 as proved by National Tax Research Center, 2002.
As stated by Case (2003), when a country‟s currency depreciates (falls in value),
its import prices rise and its export prices (in foreign currencies) fall. When the
US dollar is cheap, US products are more competitive with products produced in
the rest of the world, and foreign-made goods look expensive to US citizen.
Similar to the statement that had been delivered by Finance Secretary Carlos
Dominguez III that, even with a stronger dollar, imports of capital goods continue
to increase which translate into higher revenue collection of the Bureau of
Customs.
The slope of value of imports in the year 2001 shows slightly decrease on
the value of import, it was during the Estrada Administration, when there was
severely criticized for cronyism, incompetence, and corruption, causing it to lose
the confidence of foreign investors, and in the latter part of Estrada
Administration when Estrada was accused of influencing an investigation in the

51
stock market manipulation, foreign investments declined. Foreign companies like
Philips Electronics and Johnson & Johnson pulled out of the Philippines that
affect the good relationship between the close countries and the importation of
the Philippines (Hays, 2015).
Then in the year 2002-2008, the figure 3 shows an increasing value of
import and export. The government was dominated by former President Gloria
Macapagal Arroyo. There are a lot of changes and reform to the BOC that are
supported by Arroyo‟s Administration that helps the BOC to get what is due to the
government. And one of this was, the implementation of Run After Smugglers
(RATS) that directed against the perennial problem of smuggling resulted to the
decrease on the revenue collection of the Bureau. Another strategy was came up
with the initiation of the DOF to joined hands with the Office of the Solicitor
General to beef up the BOC‟s legal service by hiring new lawyers to litigate
customs-related cases. There are 78 criminal cases had been filed against
respondents involving illegal shipments worth Php 1.7billion in the mid of 2009. It
was almost Php 2 billion was decrease in revenue collection of the agency due to
the smuggling and corruption (www.officialgazzette.com, 2009).
Figure 3 shows the decrease in the value of imports in the year 2009. It
was supported by the statement of the Commissioner Morales (2009), the
Bureau of Customs (BoC) has had to endure a most difficult period for the

52
entirety of 2009 as the economy absorbed the socks of the financial maelstrom
that gripped the financial system worldwide. As the country‟s second biggest
revenue earner, it was mandated to provide nearly a third of the government‟s
income at a time when the demand for imports was sinking and business activity
experienced a sharp downturn.
In the next seven years (2010-2017), the BOC value of imports shows an
improvement, that result to the increasing trend of the value. The increase was
achieved because of the reforms and revenue enhancement measures by the
new stewards of the agency, despite the fact that 1,988 tariff subheadings and
specific commodities which used to contribute several billions of pesos to
government coffers had started to come in either duty free or with reduced tariff
classifications (BOC, Annual Report, 2010). Among these reforms is the Bureau's
computerization program, the e2m project. When it was implemented, e2m
eliminate face to face transactions and also fast track the processing of
documents and contribute significantly to the facilitation of trade in the country.
Another program of the BOC that helps the agency to reach their target collection
is the Risk Management System wherein selectivity is under this program.
Selectivity system has three color distinction that allows the imported goods to
undergo examination and inspection depends on the color appears on the
documents given by the Bureau once the goods declaration has been lodge.

53
Imported goods that falls under Green Lane allows the immediate release of
goods without conducting physical examination, while under Yellow Lane, goods
are subject to documents examination and if the imported goods fall under Red
Lane, it is necessary to conduct immediate physical and document examinations
in order to assure that the declared goods are the same goods appeared on the
actual inspection. It helps the agency to get what is due to the government and to
the transacting public.
70,000.00
60,000.00
VALUE OF EXPORTS
50,000.00
40,000.00
30,000.00
20,000.00
10,000.00
0.00
1987 1989 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
YEAR
Figure 4
Value of Exports (1987-2017)
Figure 4 represents the slope of value of exports from the year 1987-2017.
It shows the increasing trend of value of exports from the year 1987-2000 and it
was cause by the program implemented by Aquino Administration to be more
open to foreign trade and to promote products made in the Philippines.

54
One of the programs that she implemented is the Export Enterprise
Development Program that sought to maintain and improve the competitiveness
of exporters countrywide through the expansion of their product base, increase in
productivity, and the improvement of management and professionalism in the
export sector that results to the strong value of export of the Philippines. In the
year 1987-1991, when the Philippine Trade Training Center (PTTC) conducted
500 various training programs/seminars for exporters as well as the government
personnel involved in export sector that helps the export sector to have a quality
product that will patronize not only nationwide but worldwide (President‟s
Report,1992).
According to Dohner and Intal (1989), the strongest growth was in the
agricultural sector. The increase in world prices for copra and coconut oil late in
the year, the lifting of monopoly restrictions in the sector, and the end to the ban
on copra exports resulted in a doubling of farmgate prices for coconuts. This
greatly increased rural incomes and sales of commodities in rural areas. Export
earnings rose by almost 5 per cent during the year, with large volume increases
of coconut products, fish, and prawns.
In line with the increase of export in the year 1987-2000, Ramos
government, successor of Aquino Administration, basically served its role as the
carrier of the momentum of reform and as an important vehicle in hastening the

55
pace of liberalization and openness in the country. The administration was a
proponent of capital account liberalization, which made the country more open to
foreign trade, investments, and relations. It was during this administration when
the Bangko Sentral ng Pilipinas was established, and this administration was
when the Philippines joined the World Trade Organization and other free trade
associations such as the APEC. Because of the smooth drive of the government,
Philippine products became available in foreign market and became known not
only in the Philippines but also in the whole world that results in the increase of
the value of exports. President Ramos also introduced the “buy Filipino
movement” which encourage the use of Filipino products above imported ones
that makes the country to have a balance of trade and a healthy economy (Binay
and Raguro, 2017).
But there is a sudden depreciation in the value of export in the year
2001during the Estrada‟s government wherein the cronyism and other big issues
caused the country„s image of economic stability to change towards the worse.
Targeted revenues were not reached, implementation of policies became very
slow, and fiscal adjustments were not efficiently conceptualized and implemented
that result on the sudden reduction in the value of exports. All those disasters
was caused by the sudden entrance of the Jueteng controversy, which gave rise
to the succeeding EDSA Revolution (Philippine Daily Inquirer, 2015).

56
But Figure 4 shows a succeeding year in 2002-2008 as it presents the
increasing slope of the value of export. It was during the Arroyo Administration
when Commission on Information and Communications Technology (CICT) was
created to oversee ICT development. CICT plays an important role in providing a
singular voice in government on issues that affect information technology and
business processing outsourcing (IT-BPO). IT-BPO industry covers the export
services such as contact centers, back-office operations and knowledge process
outsourcing, engineering services outsourcing, transcription, and creative
process outsourcing. Parallel to the growth in the workforce is the striking growth
in export revenues.
Information Technology nowadays is considered as the driver of the
Philippine economy as it is dependent on the modern technology that helps the
lives of every individual to become easier and organize (Farhadi, 2012). And also
the reforms conducted by the Bureau of Customs that was supported by the
Arroyo‟s government helps the Bureau to have a modernize export procedure
which is the Automated Export Documentation System (EDS) under electronic-
to-mobile (e2m) that makes the flow of goods easier and simplified when it was
exported into other country.
When financial crisis happened in the year 2009, Philippine exports
resulted to have a declined value but after the sharp downfall in the 2009

57
Philippine exports have made a significant recovery in the next years. In the year
2010 the value of export increases but shows a downward slope in the year
2011. This poor performance in the Philippine exports was not a surprised
because it was already shadowed that Philippine exports will suffer from the
financial-turned-economic crises in the west and the geopolitical risks in Arab
countries. Another reason is the twin disasters that befell Japan in March 2011
and the floods that kept Thailand on a standstill were also culprits to the slower
production output of the Philippines. According to the PSA, Japan is one of the
top importers of the Philippines in 2011, wherein the biggest percentage of our
manufactured products was exported to Japan (Rimando, 2012).
Figure 4 shows that Philippines recovered from the crises they suffered in
previous year, thus, it presents an upward movement of exports in the year 2012-
2017. According to Phil Export, during the term of former President Benigno
Aquino III, he continued the program being implemented by Arroyo‟s government
regarding the promotion of exports. Philippine Export Development Plan (PEDP)
is one of the strategies of President Aquino to come up in a country that
considered the quality of the products and not the quantity. The PEDP shall
define the country's annual and medium-term export thrusts, strategies,
programs and projects and shall be jointly implemented by the government,
export and other concerned sectors. The key features of this programs that

58
contribute to the increase in the value of exports are the faster growth of
emerging economies with large consumer populations and the slower single-digit
growth of developed markets. This resulted to a re-balancing of consumption,
export market size and supply chain configurations in relation to pre-crises
periods. As stated in the Export Development Act (EDA), the role of the private
sector in export development is driving business to achieve export targets. The
role of the public sector is creating an enabling environment by formulating and
implementing policies based on operating realities and the imperatives of public
governance (Alcantara and Mercado, 2016).
10,000.00
5,000.00
0.00
IN MILLION DOLLARS
-5,000.00
Balance of Trade
-10,000.00
-15,000.00
-20,000.00
-25,000.00
-30,000.00
1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017
YEAR
Figure 5
Balance of Trade (1987-2017)
Figure 5 shows the trend of the Balance of Trade that derived from the

59
value of export and import of the Philippines from the year 1987-2017. But the
figure demonstrates a trade deficit or unfavourable balance of trade from 1987-
1998. Balance of trade is derived from the difference of the value of export and
import of the Philippines for the particular year.
It was supported by the study of Hays (2015), that in 1988 the economy
once again began to encounter difficulties. The trade deficit and the government
budget deficit were of particular concern. In 1990 the economy continued to
experience difficulties, a situation exacerbated by several natural disasters, and
growth declined to 3 per cent. In general, the city's infrastructure was in decline.
Industrial growth fell from 6.9 per cent in 1989 to 1.9 per cent in 1990; growth
investment in 1990 in both fixed capital and durable equipment declined by half
when compared with the previous year.
In the study conducted by Yap (1997), because of the simulated changes
in the tariff from 1993 to 1996, the result revealed that the policy of an across the
board uniform tariff of five per cent led to worsening of the trade deficit. In
addition, the increase in the volume of imports, which led to an unambiguous fall
in investment and, consequently, in a lower growth rate.
According to Goldstein and Xie (n.d.), during the Asian Economic Crisis in
1997-1998, the Philippines stock market declined by 32 per cent and the
currency against the dollar had depreciated by as much as 48 per cent and later

60
level off at 30 per cent at end of December 1997. Because many of its exports
went to Europe it was not hurt that badly by a lack of demand from crisis-hit Asia.
As extracted to Economic Outlook (2001), exports of goods and services (in
nominal dollar terms) grew by 6.3 per cent in 2000. Merchandise export growth
slowed down sharply, from 19.1 per cent in 1999 to 9 per cent in 2000, marked
by a weakening of the global electronics market, particularly during the second
semester. On the other hand, total imports dipped 0.8 per cent. Tepid
investments and the peso depreciation slowed down import demand. As a result,
the trade balance further improved, from US$4.96 billion in 1999 to US$6.92
billion in 2000.
In the year 2002-2017, the figure shows an unfavourable balance of trade
wherein the value of imports exceeds the value of exports. But according to the
study of Amadeo (2018),most of the time, trade deficits are an unfavourable
balance of trade. As a rule, countries with trade deficits export raw materials.
They import a lot of consumer products.
Contrary to the aforementioned statement by Amadeo (2018), sometimes
a trade deficit is the more favorable balance of trade. It depends on where the
country is in its business cycle. For example, Philippines has a trade deficit.
But many of its imports are raw materials that it converts into finished goods and

61
then exports. That gives it a competitive advantage in manufacturing and finance.
It creates a higher standard of living.
The government provides incentives to exporters to boost their sector and
thus help the country have a better balance of trade picture. Philippines have
been running annual trade deficits due to high imports of raw materials and
intermediate goods. In 2013, the biggest trade deficits were recorded with:
Taiwan, Saudi Arabia, Thailand and South Korea while the biggest trade
surpluses with: Japan, Hong Kong and the United States (Trading Economics,
2013).
According to Lopez (2018), the Philippines had the largest on record in
2017, stocking concerns that its current account balance would deteriorate and
put more pressure on the already-weak peso. A surge in the gap was driven in
part of infrastructure-related goods as the government pushes ahead its
ambitious plan to overhaul outdated railways and airports. The record high trade
supports the view that Philippine peso weakness would also be norm as the
trade deficit widens.
2. Macroeconomic Indicators that influenced the Collection Performance of
the Bureau of Customs
The table below shows the summary output of multiple regression in terms

62
of import growth rate, export growth rate, inflation rate, exchange rate, interest
rate and GDP.
Table 2.1
Multiple Regression on the Effect of the Macroeconomic Indicators
to the BOC Actual Collection Performance
Macroeconomic Unstandardized Standardized Sig. Decision Verbal

Coefficient
t
Indicators Coefficient HO Interpretation
B Beta
(Actual Collection) 80820.195 2.118 .045 Significant

IMPORT Growth 2.725 .514 3.282 .003 Reject Significant
EXPORT Growth 1.108 .184 1.129 .270 Accept Not Significant
INFLATION RATE 3583.732 .125 2.278 .032 Reject Significant
EXCHANGE Rate -2711.410 -.282 -3.946 .001 Reject Significant
INTEREST RATE -3584.805 -.181 -2.085 .048 Reject Significant
GDP .011 .423 4.264 .000 Reject Significant
a. Dependent Variables: Actual Collection
Table 2.1 presents the regression result on the effect of macroeconomic
indicators to the BOC actual collection from 1987-2017. The chosen
macroeconomic indicators as the selected independent variables are good
determinant to the BOC actual collection. For the complete tabulation data, refer
to Appendix L.
The researchers hypothesized that import growth, inflation rate, exchange
rate, interest rate and gross domestic product (GDP) significantly affect the
actual collection of the Bureau, and thus, hypothesis is rejected. While it also

63
found that only export growth do not affect the actual collection, hence
hypothesis is accepted.
Based on the econometric model, (BOCInc=808200.195 + 2.725(IGR) +
1.108(EGR) + 3583.732(IFR) - 2711.410 (ER) - 3584.805 (IR) + 0.11(GDP), the
export growth rate was found to be the only indicator that has no significant effect
on the revenue collection as indicated by the P-value of .270 at 5% level of
significance, considering that the Philippines does not collect duties and taxes on
exported goods except for logs.
According to National Tax Research Center (NTRC) (2011), logs are the
only remaining products subject to the export duty under Section 514 of the old
tariff law, now Section 1612 of the Customs Modernization and Tariff Act or RA
10863. The export duty imposed on logs is 20% of the gross Free on Board
(FOB) value at the time of shipment based on the prevailing rate of exchange.
However, only planted trees are subject to the export duty, since all naturally
grown trees are banned from being exported under Ministry of Environment and
Natural Resources Memorandum Order No. 8 (issued June 20, 1986).
This finding is contradicting to the aforementioned statement. As the
exports of both goods and services increases, more domestic industries engage
in international trade require the BOC to collect more export duties. Increase in

64
exports indicates that more foreign currency is coming into the country which
gives a positive effect to the economy. And as the country becomes more
productive, demand for other products produced in other countries tends to
increase which require imports to increase. In that case, more collection of lawful
revenues and all other dues, fees, charges, fines and penalties can be obtained
by the BOC (Remo, 2004).
Based on the findings of the researchers, the Philippines did not collect
duties and taxes to their goods for exportation, except logs, in order to promote
the Philippine products to other countries, because if the country impose duties
on goods for exports, there‟s a possibility that the importer from another country
will decline and the goods in the Philippines will not be acknowledge in the world
market. Because there is no duty collected from the product of the Philippines,
the revenue collection of the Bureau of Customs is low. The logs are made
dutiable in order to protect the Philippine forest from those illegal loggers who
continuously destroy the Philippine forest.
The slope of import growth rate (b1= 2.725) indicates that, for every one
unit increase in the importation, there is a corresponding 2.725 increase in the
BOC collection holding other variables constant. Because the more import of
goods entered into the Philippines, the more revenue collection being collected.

65
Based on the facts presented, the researchers found out that, when there
is a high import, the collection of the BOC is expected to increase and it may also
decrease because not all importation is dutiable or subject to the collection of
duties and taxes, there‟s what is called conditionally and/or duty exempt
importation stated in Section 800 of the Customs Modernization and Tariff Act
(CMTA). The goods and articles under the said section are not subject to duties
and taxes as long as they comply on the rules and regulations pertaining such
provisions, therefore decreasing the expected collection of the Bureau.
International Trade Agreement such as ASEAN Free Trade Area allows the
member country to enjoy the concessions and privileges appurtenant thereto like
the duty free importation wherein the imported goods are zero duty.
The researchers also added that when the import increases, the revenue
that will be collected will also increase because of the duties and taxes imposed
on import products except those provided in Section 800 of the CMTA as
mentioned above. This finding is supported by the study of Piong (2010) where
she found out that one of the factors that affect the increase of revenue collection
is the influx of imports, it means that when the volume of shipments occurs, the
expected revenue collection will also increase.
According to Case (2003), the depreciation encourages exports and
discourages imports. It also means that the price dollars of imports are

66
increasing. The impact of the depreciation on the price of imports is generally felt
quickly, while it takes time for export and import quantities to respond to price
changes. In the short run, the value of import increases more than the value of
exports, so the balance of trade worsens.
The slope of inflation (b3= 3583.732) indicates that, for every one unit
increase in the Inflation, there is a corresponding 3583.732 increase in the BOC
collection holding other variables constant. According to Miller (1991), the
economy can usually adapt to gradually rising prices. However, unpredictable
inflation has a destabilizing effect on the economy. That is, consumers and
businesses act differently that they would if the economy were growing at a
stable rate. For example, during periods of high inflation, consumers may borrow
and spend more. They realize that the dollars they use to make loan payments
will be worth less and less as inflation rises. As, a result, creditors will eventually
raise interest rates to maintain the level of profit they had before inflation began
to rise rapidly.
Contrary to the aforementioned statement, when inflation occurs, each
dollar of income will buy fewer goods and services than before. Inflation reduces
the “purchasing power” of money. But inflation does not mean that all prices are
rising. Even during periods of rapid inflation, some prices may be relatively
constant while others are falling (Brue, 2005).

67
Based on the assessment of the researchers, inflation has an advantage
on the collection performance of the Bureau of Customs, for example, there‟s a
big demand but the supply is not enough. Though the inflation rate is high and
there‟s a huge demand for rice, the importers will import rice in order to fulfil the
country‟s demand despite of the high price of rice due to inflation. This
importation, despite of the high inflation, will result to an increase in the revenue
collection of the Bureau of Customs.
The slope of foreign exchange rate (b4= -2711.410) indicates that, for
every one unit increase in the foreign exchange rate, there is a corresponding -
2711.410 decrease in the BOC collection holding other variables constant.
Because the higher the foreign exchange rate, the lesser the revenue collection
of the Bureau.
Based on the analysis of the researchers, as the value of peso
depreciates, the beneficiary will be the OFW‟s, exporters and the different
business corporation in the country. The OFW‟s, because as the value of peso
falls, the value of dollars in the foreign country is strong, their family in the
Philippines can exchange the dollars for a high value. The exporters as a natural
person and the business sectors as a juridical person, because when the buyer
in the foreign country import goods, the income coming from the buyer is in

68
dollars, meaning to say, as the peso falls, dollar have a strong value and
therefore, the exporter will earn more because of the exchange rate used. These
scenarios will lead to a high revenue collection.
The peso depreciation has an advantage on the high collection of the
Bureau of Customs. It was supported by Portcall articles (2017) that the foreign
exchange rate likewise increase from P47.49 in 2016 to P50.04 in 2017 resulting
in higher revenue yields of the Bureau of Customs.
Based on the researchers findings, the peso appreciation leads to
decrease in the revenue collection of the Bureau because as the
importers/buyers in the Philippines imports from the foreign country, they will pay
less duties and taxes as the value of peso is strong and the value of dollar is
weak.
The slope of interest rate (b5= -3584.805) indicate that, for every one unit
increase in the Inflation Rate, there is a corresponding (-3584.805) decrease in
the BOC collection holding other variables constant. According to Brue and Mc
Connel (2005), changes in the price also affect the amount of money people
need to borrow and so tend to affect interest rate. At lower price level, consumer
borrowing needs are smaller.

69
Furthermore, as the demand for loans diminishes, interest rates tend to
decline as well. The “cheaper” money stimulates more borrowing and loan-
financed purchase. Although lower price levels tend to increase the volume of
output demanded, they have the opposite effect on the aggregate quantity
supplied. The production possibilities are defined by available resources and
technology. Within those limits, however, producers must decide how much
output they‟re willing to supply. The supply decisions are influenced by changes
in the price level.
Based on the assessment of the researchers, when the interest rate in the
banks of one country is high, the debtor can no longer borrow the same amount
of money because of the high interest imposed. This situation will lead the
importers to limits their importation of goods from other countries and will result
to low revenue collection while when the interest rate is low, the debtor will
increase and borrow money from the banks. This situation will lead the importers
to import goods of a huge volume and take advantage the low interest rate that
this will result in the high revenue collection of the Bureau of Customs.
The slope of GDP (b6= .011) indicates that, for every one unit increase in
the GDP, there is a corresponding .011 increase in the BOC collection holding
other variables constant. In connection with this, as cited by unknown author
(2017), GDP matters because it shows how healthy the economy is.

70
Rising GDP means the economy is growing, and the resources available to
people in the country – goods and services, wages and profits – are increasing.
Based on the facts presented, the researchers found out that, as the
Philippines have many investors, they tend to have more job opportunities which
lead to more production of goods in the country. The Philippines mainly import
raw material from other country in making their products that results to GDP-
which shows how healthy the economy is. This situation will result to an increase
in the revenue collection of the Bureau of Customs.
To summarize, the discussion presents the regression result on the effect
of macroeconomic indicators to the BOC revenue collection from 1987-2017. The
Import Growth Rate, Foreign Exchange Rate, Interest Rate, Inflation Rate and
Gross Domestic Product (GDP) as the selected independent variables are good
determinants to the BOC Actual Collection. The export growth rate was found to
be the only indicator that has no significant effect on the revenue collection as
indicated by the P-value of .270 at 5% level of significance, considering that the
Philippines does not collect duties and taxes on exported goods except for logs.
The Import Growth Rate indicates that, when the import increases, the revenue
that will be collected will also increase because of the duties and taxes imposed
on import products except those provided in Section 800 of the CMTA as they
are conditionally tax and/or duty exempt importations.

71
The inflation rate indicates that, for every one unit increase in the Inflation,
there is also a corresponding increase in the BOC collection. When inflation
occurs, each dollar of income will buy fewer goods and services than before.
Inflation reduces the “purchasing power” of money which leads to higher revenue
collection of the Bureau whenever an import occurs. The foreign exchange rate
indicates that, for every one unit increase in the foreign exchange rate, there is a
corresponding decrease in the BOC collection, because the higher the foreign
exchange rate, the lesser the revenue collection of the Bureau. The Interest Rate
indicates that, for every one unit increase in the Inflation Rate, there is a
corresponding decrease in the BOC collection and lastly, the slope of GDP
indicates that, for every one unit increase in the GDP, there is also a
corresponding increase in the BOC collection. Because in the production of
goods to be export, the importers in the Philippines will buy raw materials to the
foreign country which leads to an increase in the revenue collection of the
Bureau of Customs.
Table 2.2 shows the result of regression in the effect of macroeconomic
indicators in the value of imports. It presents that the Exchange rate and the GDP
are significant and good determinants in the value of imports. The exchange
ratehas a P-value of .012 and a GDP of .000, , thus, indicates that they are

72
significant. While inflation rate and interest rate are found not significant as their
P-value exceeds 0.05. For the complete tabulation data, refer to Appendix L.
Table 2.2
Multiple Regression Analysis on the Effects of
Macroeconomic Indicators To the Value of Imports
a
Coefficients
Macroeconomic Unstandardized Standardized t Sig. Decision Interpretation

Indicators Coefficients Coefficients HO
B Beta
VALUE OF IMPORT 7744.809 .604 .551 Accept Not Significant
INFATION RATE -101.535 -.017 -.193 .849 Accept Not Significant
EXCHANGE RATE 471.567 .239 2.687 .012 Reject Significant
INTEREST RATE -354.484 -.089 -.607 .549 Accept Not Significant
a. Dependent Variable: Value of Import
The researchers hypothesized that exchange rate and gross domestic
product (GDP) are found significant to the value of import, thus, hypothesis is
rejected. While inflation rate and interest rate did not affect the value of imports,
hence the hypothesis is accepted.
Based on the econometric model, ( = 7744.809 – 101.535(IFR) +
471.567 (ER) – 354.484(IR) + .003(GDP), the inflation and interest rate were
found to have no significant effect s to the value of imports as indicated by the P-
value of .849 (Inflation) and .549 (Interest) at 5 per cent level of significance.

73
The slope of inflation rate (b1= -101.535) indicates that, for every one unit
increase in the inflation rate, there is a corresponding -101.535 decrease in the
value of imports holding other variables constant. This finding is supported by
Garodia (2017) citing that there might not be a direct impact on imports but there
may be an indirect effect. Since prices have increased for most of the products,
people of the country might import the same products from other country in
cheaper value.
The slope of exchange rate (b2= 471.567) indicates that, for every one
unit increase in the exchange rate, there is a corresponding 471.567 increase in
the value of import of the Philippines holding other variables constant. Because
depreciation can lead to the increase of the revenue collection of the Bureau.
Based on the researchers‟ findings that, when the FOREX increases, the
imports will increase because when the demand of the country for the import
products is needed, the importers have no other choice but to import goods
despite of the high foreign exchange rate, this is from the fact that no country can
produced all goods that they needed. This situation will lead to the increase on
imports.
According to Cu (2017), Finance Secretary Carlos Dominguez III stated
that even with a stronger dollar, imports of capital goods continue to increase

74
which translates into higher revenue collections for the Bureau of Customs. The
main driver of the foreign exchange rate are speculations over the planned three-
phase increase in interest rates by the US Federal Reserve, which has prompted
investors to migrate their dollars to the United States and resulted in a drop in
demand for the Philippine peso.
Budget Secretary Benjamin Diokno stated that at the macroeconomic
level, a one-peso depreciation would yield a net gain of PHP 7.2 billion for the
state coffers because revenues will increase by PHP 9.2 billion as a result of
higher collections by the Bureau of Customs, while the foreign debt service will
only have a corresponding increase PHP 2billion. Crude oil (price) is going up
and down also because of the demand. There‟s more crude in the market than
there was in the past. So there will be some increase but it‟s not going to be that
significant according to Dominguez.
The slope of interest rate (b3= -354.484) indicates that, for every one unit
increase in the interest rate, there is a corresponding -354.484 decrease in the
value of imports of the Philippines holding other variables constant. Based on the
findings of the researchers, when there‟s a high interest rate, it can‟t directly
affect the imports of the country because of the changing demand of the people

75
The slope of GDP (b4= 0.003) indicates that, for every one unit increase in
the GDP, there is a corresponding 0.003 increase in the value of import of the
Philippines holding other variables constant. As cited by the Sandbox Networks,
Inc. (2018) that when a country imports goods, it buys them from foreign
producers. The money spent on imports leaves the economy, and that decreases
the importing nation's GDP.
Based on the findings of the researchers, when the Philippines produced
goods, they tend to import raw materials from the foreign country which results to
high imports. The products that will be produced will be added to the country‟s
GDP.
To summarize, the discussion shows the result of regression in the effect
of macroeconomic indicators in the value of imports. It presents that the
Exchange rate and the GDP are significant and good determinants in the value of
imports while inflation rate and interest rate were found not significant as their P-
value exceeds 0.05. The inflation rate indicates that, for every one unit increase
in the interest rate, there is a corresponding decrease in the value of imports of
the Philippines. The interest rate indicates that, for every one unit increase in the
interest rate, there is a corresponding decrease in the value of imports.

76
The exchange rate indicates that, for every one unit increase in the
exchange rate, there is also a corresponding increase in the value of import
because when the FOREX increases, the imports will increase because when
the demand of the country for the import products is needed, the importers have
no other choice but to import goods despite of the high foreign exchange rate,
this is from the fact that no country can produced all goods that they needed
The GDP indicates that, for every one unit increase in the GDP, there is
also a corresponding increase in the value of import because when the
Philippines produced goods, they tend to import raw materials from the foreign
country which results to high imports. The products that will be produced will be
added to the country‟s GDP.
Table 2.3
Multiple Regression Analysis on the Effects of
Macroeconomic Indicators to the Value of Exports
a
Coefficients
Macroeconomic Unstandardized Standardized t Sig. Decision Interpretation

B Beta
(VALUE OF EXPORT) 1143.584 .109 .914 Accept Not Significant
INFATION RATE -346.349 -.070 -.807 .427 Accept Not Significant
EXCHANGE RATE 637.256 .382 4.407 .000 Reject Significant
INTEREST RATE -222.377 -.065 -.469 .643 Accept Not Significant
a. Dependent Variable: EXPORT If Sig value is < 0.05 – Significant

77
As table 2.3 represents, exchange rate and GDP are also the good
determinant to the Value of Export as it selected as independent variables. The
P-value not higher than 5% tells if the chosen macroeconomic indicators are
significant in the Export Revenue. The exchange rate and GDP has a P-value of
.000, making them significant. While the inflation rate and interest rate has a P-
value of more than 0.05, thus, indicating that they are not significant. For the
complete tabulation data, refer to Appendix L.
product (GDP) are found significant to the value of exports, thus, hypothesis is
rejected. While inflation rate and interest rate did not affect the value of exports,
hence the hypothesis is accepted. Based on the econometric
model,( =1143.584 - 346.349 (IFR) + 637.256 (ER) - 222.377 (IR) +
.022(GDP), the Inflation rate and Interest rate were found to have no significant
effects on the value of exports as indicated by the p-value of .427 (Inflation) and
.643 (Interest) respectively at 5% level of significance.
The slope of inflation (b1= -346.349) indicates that, for every one unit
increase in the inflation, there is a corresponding -346.349 decrease on the value
of exports holding other variables constant. Inflation tends to push up all costs of
production which increases the producers desired sale price making the price
less competitive. The slope of foreign exchange rate (b2= 637.256) indicate that,

78
for every one unit increase in the foreign exchange rate, there is a corresponding
637.256 increase on the export of the Philippines holding other variables
constant.
Based on the assessment of the researchers, when the foreign exchange
rate increases, it lowers the foreign currency price of export goods, and feasibly
increases the quantity of manufactured goods to be exported. This situation will
result in the increase in exports due to high FOREX. Contrary to aforementioned
statement, when the foreign exchange rate decreases, the price of export goods
are expensive and probably decreases the quantity of goods to be exported.
As what Lai (2005) has stated, exchange rate movements affects exports
in two ways- its depreciation and its variability (risk). Depreciation raises exports,
but the associated exchange rate risk could offset that positive effect.
Depreciation lowers the foreign currency price of exports, and probably increases
the quantity of exports and export revenue in domestic currency. Conditions may
exist, however, where export revenue falls. Highly inelastic foreign import
demand leads to falling export revenue. Ambiguity also arises if export
production incorporates high import content, since the domestic cost or price of
export rises with depreciation. During periods of appreciation, exporters might
price to market, lowering their domestic currency price to maintain export market
share.

79
These finding is supported by the study of Cabral (2016) which showed
that exchange rate movement has no significant impact on export of goods and
services in the country. This is somehow related to what Klassen (2011) has
asserted that exchange rate has significant effects on exports.
Exchange rates can be manipulated so that they deviate from their natural
equilibrium rate. To stimulate exports, rates would be held down, and to reduce
inflationary pressure rates would be kept up (Alotaibi, 2016). Depreciation in
exchange rate increases the domestic currency value and decreases the value of
currency as well. If one country currency rate increases due to foreign exchange
rate declines then the domestic country can import the goods at cheap prices. In
contrast if the home country currency decreases due to an increase in exchange
rate then the imports of the home country will decreases due to increasing in
other country prices as well. If the domestic currency appreciates due to
declining in exchange rate the domestic country exports will bring the high
foreign exchange for the country and vice versa. When some countries currency
increases or decreases, it brings the changes in the whole business of the
country at very much extent (Chen, 2017).
The slope of interest rate (b3= -222.377) indicate that, for every one unit
increase in the Inflation Rate, there is a corresponding -222.377 decrease on the
exports of the Philippine holding other variables constant. As cited in the study of

80
Hayes (2015), U.S. companies that export to Europe will lose out as their
products become more expensive for European buyers. Companies such as
beverage bottler Coca-Cola Enterprises (CCE), tobacco companies like Phillip
Morris (PM), fast food chains including McDonalds (MCD), consumer electronics
and appliance producers like Harman International (HAR) all rely on sales to
European customers as a large portion of their annual revenues. These
companies may see their profitability suffer a result. Investors in domestic
companies that have large exposure to the European market should be wary.
The slope of GDP (b4= .002) indicate that, for every one unit increase in
the GDP, there is a corresponding .002 increase on the exports holding other
variables constant. This is because the more production of goods, exports tend
to increase. Based on the facts presented, the researchers found out that, gross
domestic product is the monetary value of all the finished goods and services
produced within a country's borders in a specific time period.
When the GDP increases, it means that the production of goods in the
Philippines also increases. This condition will lead to an increase in exports
because of the huge production of goods, which can possibly be exported.
Contrary to the aforementioned statement, when the GDP decreases or when the
production of goods are low, the exports will also decline because of the
shortage of goods to be exported.

81
To summarize, the discussion presents that the foreign exchange rate and
GDP are good determinant to the Value of Export as it selected as independent
variables while the inflation rate and interest rate has a P-value of more than
0.05, thus, indicating that they are not significant. The inflation rate indicates that,
for every one unit increase in the inflation, there is a corresponding decrease on
the value of exports. The foreign exchange rate indicates that, for every one unit
increase in the foreign exchange rate, there is also a corresponding increase on
the value of export because when the foreign exchange rate increases, it lowers
the foreign currency price of export goods, and feasibly increases the quantity of
manufactured goods to be exported. This situation will result in the increase in
exports due to high FOREX.
The slope of interest rate indicate that, for every one unit increase in the
Inflation Rate, there is a corresponding decrease on the value of exports and
lastly, the GDP indicate that, for every one unit increase in the GDP, there is
also a corresponding increase on the export holding other variables constant.
Because the more production of goods, exports tend to increase.
As indicated in Table 2.4, exchange rate and gross domestic product
(GDP) as the selected independent variables are good determinant to the
Balance of Trade. Moreover, looking at the P-value, the exchange rate and the
Gross Domestic Product can significantly affect the balance of trade.

82
Table 2.4
Multiple Regression in the Effect of Macroeconomic Indicators
To the Balance of Trade
a
Coefficients
Macroeconomic Unstandardized Standardized T Sig. Decision Interpretation

B Beta
(Balance of Trade) 52568.493 1.799 .084 Accept Not Significant
EXCHANGE RATE -1037.202 -.097 -2.557 .017 Reject Significant
1 INFLATION RATE 2274.470 .071 1.717 .098 Accept Not Significant
GDP .028 1.040 21.943 .000 Reject Significant
INTEREST RATE -1372.682 -.065 -1.015 .319 Accept Not Significant
a. Dependent Variable: BALANCE OF TRADE
The exchange rate‟s P-value is .017, while the GDP has a P-value of .000,
thus, indicating that they are significant. In contrary, P-value of inflation rate and
interest rate is higher than 0.05, making it not significant. For the complete
tabulation data, refer to Appendix L.
product (GDP) are found significant to the Balance of Trade, thus, hypothesis is
rejected. While inflation rate and interest rate did not affect the value of exports,
hence the hypothesis is accepted.
Based on the Econometric Model, (BOT= 52568.493 - 1037.202 (ER) +

83
2274.470(IFR) + .028(GDP) – 1372.682(INT), inflation rate and interest rate are
found to have no significant effects on the balance of trade as indicated by .098
for inflation and .319 for interest rate P-value. The slope of exchange rate
prescribed above indicates that for every unit increase on ER, there is
corresponding decrease in the balance of trade while in every unit increase in the
GDP, there‟s a corresponding increase in the balance of trade.
The rate at which a currency is being exchanged can have an important
effect on a nation‟s balance of trade. The balance of trade is the difference
between the value of nation‟s exports and its imports. If a nation‟s currency
depreciates, the nation will likely export more goods as its products become
cheaper to other nations. If a nation‟s currency increases in value, or price, the
amount of its exports will drop. When the value of goods leaving a nation
exceeds the value of those coming in, a positive balance of trade is said to exist.
In this case, the nation is bringing in more money as payments for goods that its
paying out. A negative balance of trade exists when the value of goods coming
into a country is greater than the value of those going out. This is also called
trade deficit. Countries usually regard that as an unfavorable trade balance. But
sometimes a favorable trade balance, or surplus, is not in the country's best
interests. For example, an emerging market should import to invest in its

84
infrastructure. It can run a deficit for a short period with this goal in mind (Miller,
1991).
According to Case (2003), when a currency depreciates, the quantity of
exports increases, the quantity of imports decreases; both have a positive effect
on the balance of trade (lowering the trade deficit or raising the trade surplus, the
net effect of the depreciation on the balance of trade could go either way. The
depreciation stimulates exports and cuts back imports, that are also increases
the dollar price of imports. It seems that the negative effect dominates initially.
The impact of the depreciation on the price of imports is generally felt quickly,
while it takes time for export and import quantities to respond to price changes. In
the short run, the value of import increases more than the value of exports, so
the balance of trade worsens. The initial effect is likely to be negative; but after
exports and imports have had time to respond, the net effect turns positive. The
more elastic the demand for exports and imports the larger the eventual
improvement in the balance of trade.
According to the study of Amadeo (2018), exports directly increase and
imports directly reduce a nation's balance of trade (i.e. net exports). A trade
surplus is a positive net balance of trade, and a trade deficit is a negative net
balance of trade. Due to the balance of trade being explicitly added to the
calculation of the nation's gross domestic product using the expenditure method

85
of calculating gross domestic product (i.e. GDP), trade surpluses are
contributions and trade deficits are "drags" upon their nation's GDP.
As cited by Liousdis (2018), interest rates alone do not determine the
value of a currency. Two other factors – political and economic stability and the
demand for a country's goods and services – are often of greater importance.
Factors such as a country's balance of trade between imports and exports can be
a crucial factor in determining currency value. That is because greater demand
for a country's products means greater demand for the country's currency as
well. Favorable numbers, such as the gross domestic product (GDP) and
balance of trade are also key figures that analysts and investors consider in
assessing a given currency.
To summarize, the discussion presents that the Foreign Exchange Rate
and Gross Domestic Product (GDP) as the selected independent variables are
good determinant to the Balance of Trade. In contrary, P-value of Inflation Rate
and Interest Rate is higher than 0.05, making it not significant. Based on the
assessment of the researchers, whenever there‟s an increase in GDP, which
means that the services and the goods produced in the Philippines also
increases, and the country tends to export more goods. The export goods will
increase and therefore it may balance the status of imports and exports which
will result to balance of trade within a country. The researchers also added that,

86
though there‟s an increase in interest rate, importers will have no choice but to
import goods (using borrowed money from the banks) because of the demand of
the country for the particular goods that they needed. As a result of this huge
demand for imported goods, this situation will lead to the decrease in the balance
of trade as the export will be left out of pace.
3. Macroeconomic Indicators with Greatest or Least Effect to the Collection

Performance of the Bureau of Customs.
The table below presents the macroeconomic indicators that has greatest
and least effect to the BOC collection performance.
Table 3
Macroeconomic Indicators’ Greatest and Least Effect to the Collection
Performance of the BOC
Macroeconomic Unstandardized Standardized
Indicators Coefficients Coefficients Effect
B Std. Error Beta
(Actual Collection) 120206.23 72242.500
Import Growth 2.289 1.109 .471
Inflation Rate 1996.106 2986.056 .070 GREATEST
Exchange Rate -1809.051 1128.140 -.189
Interest Rate -4746.860 3284.285 -.245 LEAST
GDP .011 .005 .446
a. Dependent Variable: Actual Collection
As cited on the Binary Tribune (2018), inflation and interest rates are in
close relation to each other, and frequently referenced together in economics.
Inflation refers to the rate at which prices for goods and services rise. Interest

87
rate means the amount of interest paid by a borrower to a lender, and is set by
central banks.
According to Naylor (2018), raising or lowering the base interest rate for
an economy should either boost saving or boost spending. Both of those will
have a wide range of knock-on effects for the economy, and eventually end up
either raising or lowering inflation.
Meanwhile, as stated by Dil (2018), changes of interest rate can be used
for many purpose namely inflation control, economic growth, capital market
growth and many more. On the other hand, tax is source of income to
government. It can also sometime used to promote or demote business
depending on nature of business. If interest rates increase it will leads to low
profit to corporate. As a result government will get less tax and vice versa.
Similarly it has also impact on individuals for their mortgage, savings, tax
deduction limit and many more.
4.Forecasted Revenue Collection of the Bureau of Customs (2018- 2037)
Table 4 shows the forecasted revenue collection of the Bureau of
Customs for the next 20 years using the Econometric Model below:
BOCC = 80820.195+2.725(Import Growth)+1.108(Export Growth)+3583.732
(Inflation Rate)–2711.410(Exchange Rate)- 3584.805(Interest Rate) + 011
(GDP).

88
Table 4
Forecasted BOC Revenue Collection for 2018-2037
YEAR FORECASTED REVENUE

In Billion Pesos
2018 333,294,580
2019 344,265,520
2020 352,941,200
2021 366,222,620
2022 377,205,430
2023 388,170,280
2024 399,155,120
2025 410,079,900
2026 421,092,170
2027 432,104,440
2028 443,001,800
2029 453,966,590
2030 464,93,.330
2031 475,923,680
2032 486,406,550
2033 497,871,360
2034 509,015.,90
2035 519,780,980
2036 530,793,230
2037 541,738,060
Table 4 shows the forecasted growth of the BOC revenue collection in
relation with the significant macroeconomic indicators such as import growth rate,
foreign exchange rate, interest rate, inflation rate and gross domestic product

89
(GDP) for the period of 2018-2037. The table shows that the BOC would
increase during the period 2018-2037.
According to Sicat (2017), that the passing of tax reform TRAIN (Tax
Reform for Acceleration and Inclusion) redistribute the purchasing power of the
general public or specific sector in favour of spending that is preferred by
economic policy. It creates new direction that raise and redistributes output in the
economy that may result to the higher collection of the collecting agency like
Bureau of Customs.
The Tax Reform Law raises the overall fiscal capacity to finance public
investments. The current tax to GDP ratio according to the Philippine
development plan is around 14 per cent. With this tax reform , it will push upward
toward 15 percent.
A more efficient tax collection regime means the government can invest in
other things, such as technologies that could secure the country‟s borders
against security threats and rampant smuggling activities. The increased security
would, in turn, improve customs collection as well as provide deterrence against
terrorist threats.

90
Forecasted Revenue Collection

600000000.00
FORECASTED REVENUE
500000000.00
in MILLION PESOS
400000000.00
300000000.00
200000000.00
100000000.00
0.00
2033
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2034
2035
2036
2037
YEAR
Figure 6
Forecasted BOC’s Revenue Collection (2018-2037)
Figure 6 shows the forecasted revenue collection for the next 20 years on
its increasing trends through various enhancement programs, tax system and
rules and regulations that are necessary in order to improve the revenue
collection of the Bureau of Customs as one of the largest revenue generating
arms of the Philippine government.

91
CHAPTER V
CONCLUSION AND RECOMMENDATION
This chapter presents the conclusion and recommendation about the

present study.
Conclusions
Based on the findings of the study, the following conclusions:
1. The collection performance of the Bureau of Customs from year 1987-2017 is
increasing. The increasing trend of the revenue collection is because of the
reform program conducted by the collecting agency to enhance the collection
performance and through engaging of any regional and/or international
agreements, trading partnership and preferential treatment. While the sudden
decreasing trend is cause of different problems that encountered by the Bureau
such as misdeclaration of goods that leads to under valuation that results to the
decrease of the collection
2. The macroeconomic indicators which include import growth rate, export growth
rate, foreign exchange rate, inflation rate, interest rate, and gross domestic
product (GDP) are proven and tested for having an effect on the collection
performance of the Bureau of Customs.
3. Revenue collection of the BOC is said to be paramount as it finance the
government operational expenditures and it utilized to carry out the national

92
objective of social and economic development. The Philippine Customs does not
only provide revenue for the government but likewise, local industries and
businesses will also be protected from foreign competition as it mandated by law
by three functions such as revenue collecting, trade facilitation and border
control.
4. The forecasted revenue collection for next 20 years is perhaps increasing
because of the enhancement program and effective rules and regulations of the
collecting agency that gives impressive performance on the past three years and
the new partnership with other countries may influence the increase or decrease
of the collection performance of the Philippine Customs.
Recommendations
Based on the findings and conclusions drawn from the study, the
researchers recommend the following:
1. The Bureau of Customs may create a more systematized entry processing of
imported cargoes to improve the system of entry processing of cargoes. With
this, entry processing of imported cargoes would be smooth and trouble-free and
the revenue collection of the Bureau of Customs would increase. It is also highly
recommended tightening the practice of Customs Laws regarding the import
processing in order to prevent the occurrence of fraud in the Bureau of Customs.

93
2. The Bureau of Customs may monitor the status of the different
macroeconomic factors in order to have advance planning for the prevention of
any negative effects in the revenue collection of the Bureau.
3. More precautionary measures and comprehensive guidelines should be
implemented since different factors affect the revenue collection of the Bureau of
Customs.
4. The forecasted revenue collection may only be achieved through unity of
different divisions inside the Bureau of Customs which primary purpose is to
generate funds to finance the needs of the citizen and provide common wealth.
The successful collection of the target collection leads to the increase of BOC‟s
Revenue Collection.
5. A study of similar nature utilizing other variables may be conducted to further
validate the findings of the study.
6. The country must increase its export and lessen imports to promote trade
surplus and not the trade deficit. The government should also keep an eye in
interest rates and inflation rate.

94
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https://guichet.public.lu/en/entreprises/marche-
international/licences/embargos-restrictions/embargos.html
Unknown Author (2018). What is Fiscal Year? Retrieved from https://www.fool

.com/knowledgecenter/what-is-fiscal-year.aspx
Unknown Author, (2017). Inflation and Interest Rate. Retrieved from

http://www.binarytribune.com/forex-academy/inflation-and-interest-rates/
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https://pressreader.com
Widdowson, Darwin (2012). The Changing Role of Customs: Evolution or

Revolution. Retrieved from http://customscentre.com/wp
content/uploads/2012/09/the_changing_role_of_customs_evolution_or_re
volution.pd
Wolla, Scott(2018). How Do Imports Affect GDP? St. Louis Fed September 2018
Retrieved from https://research.stlouisfed.org/publications/page1-
econ/2018/09/04/how-do-imports-affect-gdp/

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Ylagan, Amelia H.(2017). Bad news about Peso. Retrieved from

http://www.bworldonline.com/content.php?section=Opinion&title=bad-
news-for-the-peso&id=147624
JOURNALS
Bureau of Customs: Annual Report 2009 to 2017
Douglas, Irwin A. Free Trade Under Fire. 2d ed. Princeton: Princeton University
Press, 2005
E.O 226 (1987). Fiscal Incentives.
Fang, W., Lai, Y., Miller, S. (2006). Export Promotion through Exchange Rate
Changes: Exchange Rate Depreciation or Stabilization?” Southern
Economic Journal, 72(3), pp. 611-626
Klaassen, F. (2004). Why is it so difficult to find an effect of exchange rate risk
on trade? Journal of International Money and Finance 23: 817–39.
Local Government Code of the Philippines,( n.d.)
National Tax Research Center Tax Reseach Journal. (2011) Volume XXIII.3
Philippine Daily Inquirer. (2015).The Philippine Administration. Metro Manila,

Philippines.
Republic Act No. 10863. (2016). Customs Modernization and Tariff Act. Metro
Manila, Philippines
TAX PERFORMANCE ANALYSIS OF THE BIR AND BOC: 1998-2009 (2011).

Retrieved from http://www.ntrc.gov.ph/images/journal/j20110506a.pdf
UNPUBLISHED MATERIALS
Alcantara N. and Mercado L. (2016). Electronic Products Export of the

Philippines
for the year 2004-2015:An Assessment, Westmead International School.

103
Asi M. (2004) entitled An Analysis on the Effect of the Level of Net Export to the
Money Supply of the Philippines Batangas State University
Binay, C. and Raguro, J. (2017). Problems Encountered on the Importation of

Animals and Animal Products of Accredited Importers in the Province of
Laguna. Thesis: Westmead International School.
Brotonel. M (2014). Effects of Imports to the Revenue Collection of the Bureau

of Customs Port of Manila from Fiscal Year 2002-2012. Thesis: Batangas
State University.
Cadacio, J. (2012). Bureau of Customs Revenue Collection: An Analysis.

Thesis: Batangas State University.
Caringal, A. and Galac, R. (2011). Revenue Collection Performance of the

Bureau of Customs Port of Batangas. Thesis: Batangas State University.
Medrano, C. (1999). Factors Affecting the Revenue Collection of the BOC POB
for the Calendar Year 1997. Thesis: Lyceum of the Philippines University
Batangas.
Perez, M. (1999). Factors Affecting the Revenue Collection of the Bureau of

Customs Port of Batangas-Fiscal Year 1997. Thesis: Batangas State
University.
Piong, R. (2010). Status and Problems Encountered in the Revenue Collection

of the BOC Port of Batangas for Fiscal year 2005-2007. Thesis: Lyceum
of the Philippines University-Batangas.
Recinto A. (2012). Revenue Collection of the Bureau of Customs at the Port of

Batangas for the Fiscal Year 2006-2010: A Comparative Study. Thesis:
Lyceau of the Philippines University-Batangas.

104
APPENDICES

105
Appendix A
Letter to the Bureau of Customs

106
Appendix B
Letter to the Philippine Statistics Authoriy

107
Appendix C
BOC Actual Collection from 1987-2017
YEAR ACTUAL COLLECTION IN

BILLION PESOS
1987 25,997
1988 25,014
1989 38,375
1990 45,948
1991 64,391
1992 72,870
1993 81,971
1994 81,610
1995 97,601
1996 104,566
1997 94,800
1998 76,005
1999 86,497
2000 95,006
2001 99,981
2002 99,322
2003 117,201
2004 127,269
2005 154,566
2006 198,161
2007 209,439
2008 260,248
2009 220,307
2010 259,240
2011 265,109
2012 289,867
2013 304,926
2014 369,277
2015 367,534
2016 396,365
2017 258,184
Source: Bureau of Customs

108
APPENDIX D
Forecasted Revenue Collection 2018-2037
YEAR Forecasted Revenue

Collection
(2018-2037) in Million Pesos
2018 378,463.19
2019 389,699.75
2020 400,936.32
2021 412,172.88
2022 423,409.44
2023 434,646.01
2024 445,882.57
2025 457,119.13
2026 468,355.69
2027 479,592.26
2028 490,828.82
2029 502,065.38
2030 513,301.95
3031 524,538.51
2032 535,775.07
2033 547,011.64
2034 558,248.20
2035 569,484.76
2036 580,721.32
2037 591,957.89

109
Appendix E
Value of Import from 1987-2017
YEAR VALUE OF IMPORT

(US DOLLARS)
1987 6,736.97
1988 8,159.38
1989 10,418.82
1990 12,206.16
1991 12,051.36
1992 14,518.93
1993 17,597.40
1994 21,332.57
1995 26,537.63
1996 32,426.93
1997 35,933.82
1998 29,659.89
1999 30,742.46
2000 34,490.87
2001 33,057.16
2002 39,236.51
2003 40,470.51
2004 44,039.21
2005 47,418.18
2006 51,773.68
2007 55,513.74
2008 56,746.06
2009 43,091.53
2010 54,932.92
2011 60,495.84
2012 62,128.66
2013 62,410.57
2014 65,397.98
2015 71,067.23
2016 92,047.00
2017 84,108.00
Source: Philippine Statistics Authority

110
APPENDIX F
Value of Export from 1987-2017
YEAR VALUE OF EXPORT

(US DOLLARS)
1987 5,720.24
1988 7,074.19
1989 7,820.00
1990 8,186.03
1991 8,839.51
1992 9,824.31
1993 11,374.80
1994 13,482.90
1995 17,447.19
1996 20,542.55
1997 25,227.70
1998 29,496.35
1999 35,036.89
2000 38,078.25
2001 32,150.20
2002 35,208.16
2003 36,231.21
2004 39,680.52
2005 41,254.68
2006 47,410.12
2007 50,465.72
2008 49,077.54
2009 38,435.80
2010 51,497.51
2011 48,304.92
2012 52,099.52
2013 56,697.86
2014 62,101.62
2015 58,827.24
2016 68,480.07
2017 57,406.00

111
APPENDIX G
Balance of Trade from 1987-2017
YEAR BALANCE OF TRADE

1987 -1,016.73
1988 -1,085.19
1989 -2,598.11
1990 -4,020.13
1991 -3,211.85
1992 -4,694.62
1993 -6,222.60
1994 -7,849.67
1995 -9,090.44
1996 -11,884.38
1997 -10,706.12
1998 -163.54
1999 4,294.43
2000 3,587.38
2001 -906.96
2002 -4,028.36
2003 -4,239.31
2004 -4,358.69
2005 -6,163.50
2006 -4,363.57
2007 -5,048.02
2008 -7,668.52
2009 -4,655.73
2010 -3,435.41
2011 -12,191
2012 -10,029.14
2013 -5,712.70
2014 -3,296.37
2015 -12,239.99
2016 -23,567.24
2017 -26,702.00

112
APPENDIX H
Inflation Rate
YEAR INFLATION RATE

1987 3.8
1988 8.8
1989 12.2
1990 14.2
1991 18.7
1992 8.9
1993 7.6
1994 9
1995 8
1996 9.1
1997 5.9
1998 9.8
1999 6.6
2000 4.4
2001 6.8
2002 3
2003 3.5
2004 6
2005 7.6
2006 6.2
2007 2.9
2008 8.3
2009 4.2
2010 3.8
2011 4.6
2012 3.2
2013 3
2014 4.1
2015 1.4
2016 1.8
2017 3.1

113
APPENDIX I
Foreign Exchange Rate
YEAR FOREIGN EXCHANGE

RATE
1987 20.568
1988 21.095
1989 21.737
1990 24.31
1991 27.479
1992 25.512
1993 27.12
1994 26.417
1995 25.714
1996 26.216
1997 29.471
1998 40.036
1999 39.089
2000 44.194
2001 50.993
2002 51.609
2003 53.49
2004 56.04
2005 55.085
2006 51.314
2007 46.148
2008 44.475
2009 47.637
2010 45.11
2011 43.313
2012 42.229
2013 42.446
2014 44.395
2015 45.048
2016 47.492
2017 50.4
Source: Banko Sentral ng Pilipinas

114
APPENDIX J
Interest Rate
YEAR INTEREST RATE

1987 21.3
1988 12.9
1989 19.3
1990 24.3
1991 23.5
1992 19.4
1993 14.6
1994 11.2
1995 14.6
1996 14.8
1997 16.2
1998 18.4
1999 11.8
2000 10.9
2001 12.4
2002 8.9
2003 9.5
2004 10.1
2005 7
2006 9.7
2007 8.7
2008 8.8
2009 8.5
2010 7.7
2011 6.7
2012 5.7
2013 5.8
2014 5.5
2015 4.5
2016 4
2017 2.9

115
APPENDIX K
Gross Domestic Product
YEAR GDP
(MILLION PESOS)
1987 682,764
1988 799,182
1989 925,444
1990 1,077,237
1991 1,248,011
1992 1,351,559
1993 1,474,457
1994 1,692,932
1995 1,905,951
1996 2,171,922
1997 2,426,743
1998 2,665,060
1999 2,976,905
2000 3,354,727
2001 3,673,687
2002 4,022,694
2003 4,584,102
2004 5,120,435
2005 5,677,750
2006 1,671,957
2007 6,892,721
2008 7,720,903
2009 8,026,143
2010 9,003,480
2011 9,708,332
2012 10,561,089
2013 11,538,410
2014 12,634,187
2015 13,322,041
2016 14,480,720
2017 15,806,359

116
Appendix L
Statistical Results
a
Coefficients
Model Unstandardized Standardized t Sig. Interpretation

Coefficients Coefficients
B Std. Error Beta
(Constant) 80820.195 38165.897 2.118 .045 Significant
IMPORT Growth 2.725 .830 .514 3.282 .003 Significant
EXPORT Growth 1.108 .981 .184 1.129 .270 Not Significant
INFATION RATE 3583.732 1572.881 .125 2.278 .032 Significant

1
EXCHANGE RATE -2711.410 687.182 -.282 -3.946 .001 Significant
INTEREST RATE -3584.805 1719.429 -.181 -2.085 .048 Significant
GDP .011 .003 .423 4.264 .000 Significant
a. Dependent Variable: ACTUAL If Sig value <0.05 - Significant
b
Model Summary
Model R R Adjusted Std. Error Change Statistics Durbin-

Square R of the R F df1 df2 Sig. F Watson
Square Estimate Square Change Change
Change
a
1 .986 .973 .966 20227.754 .973 138.728 6 23 .000 1.529

117
a
ANOVA
Model Sum of Squares df Mean Square F Sig.

b
Regression 340572730148.502 6 56762121691.417 138.728 .000
1 Residual 9410727102.864 23 409162047.951
Total 349983457251.367 29
a
Residuals Statistics
Minimum Maximum Mean Std. Deviation N
Predicted Value 23809.21 401653.94 157648.77 108369.217 30

Residual -31959.512 54400.090 .000 18014.101 30
Std. Predicted Value -1.235 2.252 .000 1.000 30
Std. Residual -1.580 2.689 .000 .891 30
a
Coefficients
Model Unstandardized Coefficients Standardized t Sig. Interpretation

Coefficients
B Std. Error Beta
(Constant) 7744.809 12819.697 .604 .551 Not Significant
INFATION RATE -101.535 527.352 -.017 -.193 .849 Not Significant
1 EXCHANGE RATE 471.567 175.484 .239 2.687 .012 Significant
INTEREST RATE -354.484 583.849 -.089 -.607 .549 Not Significant
GDP .003 .000 .706 7.080 .000 Significant
a. Dependent Variable: IMPORT If the Sig value is < 0.05 - Significant

118
b
Model Summary
b
Model Summary
Model R R Adjuste Std. Error of Change Statistics Durbin-
Model R Square Adjuste
R dR Std.Estimate
the Error of Change Statistics Durbin-
Watson
R F df1 df2 Sig. F
Square Square
dR the Estimate R F df1 df2 Sig. F Watson
Square Change Change
Square Square Change Change
Change
a Change
1 .961 .924 .912 5650.7796960 .924 78.707 4 26 .000 1.310
a
1 .952 .907 .892 6824.2779992 .907 60.667 4 25 .000 1.151
a
Predicted Value 13008.057617 77481.085938 38823.365667 19740.7428306 30

Residual -11553.5654297 18220.7460938 0E-7 6336.1830543 30
Std. Residual -1.693 2.670 .000 .928 30
a
Coefficients
Model Unstandardized Standardized t Sig. Interpretation

Coefficients Coefficients
B Std. Error Beta
(Constant) 1143.584 10486.792 .109 .914 Not Significant
INFATION RATE -346.349 429.208 -.070 -.807 .427 Not Significant

FOREIGN
1 637.256 144.610 .382 4.407 .000 Significant
EXCHANGE RATE
INTEREST RATE -222.377 473.782 -.065 -.469 .643 Not Significant
GDP .002 .000 .572 6.083 .000 Significant
b. Dependent Variable: EXPORT If Sig value is < 0.05 – Significant

119
b
Model Summary
Model R R Adjuste Std. Error of Change Statistics Durbin-

Square dR the Estimate R F df1 df2 Sig. F Watson
Square Square Change Change
Change
a
1 .961 .924 .912 5650.7796960 .924 78.707 4 26 .000 1.310
a
ANOVA
10052897998.1 b
Regression 4 2513224499.531 78.707 .000
23
1 Residual 830214090.492 26 31931311.173
10883112088.6
Total 30
16
a
Predicted Value 7870.709473 68888.117188 34305.793548 18305.6439367 31

Residual -9218.0253906 13870.0117188 0E-7 5260.5896073 31
Std. Residual -1.631 2.455 .000 .931 31

120
a
Coefficients
Model Unstandardized Coefficients Standardized t Sig. Interpretation

Coefficients
B Std. Error Beta
(Constant) 52564.507 29217.215 1.799 .084 Not Significant
EXCHANGE RATE -1037.232 405.587 -.097 -2.557 .017 Significant
1 INFLATION RATE 2274.681 1324.988 .071 1.717 .098 Not Significant
INTEREST RATE -1372.626 1351.934 -.065 -1.015 .319 Not Significant
GDP .028 .001 1.040 21.942 .000 Significant
a. Dependent Variable: BALANCE OF TRADE
b
Model Summary
Mod R R Adjusted Std. Error Change Statistics Durbin-

el Square R Square of the R Square F df1 df2 Sig. F Watson
Estimate Change Change Change
.991
1 a
.983 .980 17160.829 .983 374.663 4 26 .000 1.486

121
a
ANOVA
441344339132.7 110336084783.1 b
Regression 4 374.663 .000
97 99
1 Residual 7656845674.751 26 294494064.413
449001184807.5
Total 30
48
a
Predicted Value 29822.67 447519.47 168214.42 121290.882 31

Residual -30433.998 32930.023 .000 15975.863 31
Std. Predicted
-1.141 2.303 .000 1.000 31
Value
Std. Residual -1.773 1.919 .000 .931 31

122
APPENDIX M
CURRICULUM VITAE
SHARMAINE S. SUMADSAD
Talisay, Calaca,Batangas
09357850004
sharmainesumadsad@gmail.com
________________________________________________________________
EDUCATION Westmead International School 2015–2019
Alangilan, Batangas City
Bachelor of Science in
Customs Administration
Pedro A. Paterno National Highschool 2011–2015

Puting Bato East Calaca, Batangas
________________________________________________________________
ON-THE-JOB Stad Logistik Consolidation Co. May- July 2017
TRAINING Intramuros, Manila, Philippines
__________________ ______________________________________________
UNDERGRADUATE An Analytical Study on the 2018-2019
RESEARCH PAPER Collection Performance
of the Bureau of Customs:
Fiscal Year: 1987- 2017
________________________________________________________________
EXTRA-CURRICULAR
ACTIVITIES Member 2015-2019
Philippine Society of Customs
Administration Student (PSCAS)
Member 2015-2019
Batangas Chapter

123
Member 2015-2019
Westmead Int‟l School Chapter
Vice President for Academics 2017-2018

Class Vice President 2016-2018

2nd and 3rd Year
Vice President for Documentation 2017-2018

PSCAS WIS Chapter
Vice President for Networking 2016-2017

PSCAS WIS Chapter
Most Outstanding Leader 2017-2018
Quiz Bee Competition 2015-2016

2nd Place
Westmead InternationaL School
___________________________________________________________________
SEMINARS ATTENDED
PSCAS-CABEIHM Seminar October 2015
“Customs Administration Students:
Broadening Knowledge into Sustainable
Business Environment through PEZA”
BSU, GPB Main Campus I, Bats. City
________________________________________________________________
PERSONAL INFORMATION
Age: 19
Date of Birth: April 13, 1999
Gender: Female
Civil Status: Single
Height: 5‟3
Weight: 57 kg

124
Nationality: Filipino
Religion: Roman Catholic
________________________________________________________________
CHARACTER Available upon request
REFERENCES
I hereby certify that the above information is true and correct with the best of my
knowledge and skill.
_______________________
SHARMAINE S. SUMADSAD

125
ALYSSA MARI S. SANCHEZ

Lipahan, San Juan, Batangas
09089578419
alyssamarisanchez@yahoo.com
________________________________________________________________
Batangas Eastern Colleges 2011–2015

1 Javier St, San Juan, Batangas
________________________________________________________________
ON-THE-JOB Bureau of Customs (BOC) May- July 2017
TRAINING Sta. Clara Pier, Batangas City
__________________ ______________________________________________
________________________________________________________________
EXTRA-CURRICULAR
Member 2015-2019
Batangas Chapter
Member 2015-2019
Administration Students (PSCAS)
Vice President for Outreach 2017-2018

126

Member 2015-2019
Westmead Internationa School Chorale
Class Peace Officer 2015-2016

BS Customs Administration
1st Year
Active Participation in Cultural 2017-2018

Activities. WIS Recognition Day
Champion: Vocal Solo Competition November-2017

LPU-Batangas
PSCAS Batangas Convention
Champion: Singing Bee September-2017

Competition
Westmead International School
Champion: Mashup Competition September-2016

3rd Place: Tugsayawit Competition September-2016

2nd Place: WIS Love OPM September-2016

_____________________________________________________________
SEMINARS ATTENDED

127
Age: 20
Date of Birth: January 12, 1998
Gender: Female
Height: 5‟
Weight: 62 kg
Religion: Born Again Christian
________________________________________________________________
REFERENCES
knowledge and skill.
_______________________
ALYSSA MARI S. SANCHEZ

128
KATHLEEN B. CAROLINO
Dila, Calaca,Batangas
09759244691
Kathleencarolino7@gmail.com
________________________________________________________________
Pedro A. Paterno National Highschool 2011–2015

Puting Bato East Calaca, Batangas
________________________________________________________________
ON-THE-JOB Bureau of Customs (BOC) May- July 2017
TRAINING Sta. Clara Pier, Batangas City
__________________ ______________________________________________
________________________________________________________________
EXTRA-CURRICULAR
Member 2015-2019
Batangas Chapter
Member 2015-2019
Administration Students (PSCAS)

129
Class Vice President 2017-2018

BS Customs Administration
4th Year
3rd Place: Modern Dance November-2017

Competition
LPU-Batangas
PSCAS Batangas Convention
___________________________________________________________________
SEMINARS ATTENDED
______________________________________________________________________
________
Age: 19
Date of Birth: February 16, 1999
Gender: Female
Height: 5‟2
Weight: 45 kg
Religion: Roman Catholic

REFERENCES
knowledgeable and skill.
________________________

130
KATHLEEN B. CAROLINO

131

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Westmead Intenational School

School of Economics, Business and Accountancy

The Bureau of Customs (BOC) is known as one of the revenue generating

arms of the Philippine government. Having significantly contributing to

mission: revenue collection, trade facilitation, and trade border protection.

government‟s economic and social development programs. These programs

include: the Public-Private Partnership program, now reformed as the Build,

Build, Build program of President Rodrigo Duterte; the pro-people programs

An Analytical Study on the Collection Performance of the Bureau of Customs:

preserver of the country‟s environment and natural resources.

how the agency‟s collection performance is being affected or challenged taking

collection twenty (20) years thereafter.

Statement of the Problem

Specifically, this study seeks to answer the following questions:

An Analytical Study on the Collection Performance of the Bureau of Customs:

1.1 Actual revenue collection;

1.2 Value of imports and exports; and

1.3 Balance of trade?

2.1 BOC collection performance for the fiscal year 1987-2017;

2.2 Value of imports;

2.3 Value of exports;

2.4 Balance of trade?

performance of the Bureau of Customs for the fiscal year 1987-2017?

twenty (20) years?

The researchers tested this hypothesis:

The chosen macroeconomic indicators as foreign exchange rate, inflation

rate have no significant effect on the collection performance of the Bureau of

Customs for the fiscal year 1987-2017.

An Analytical Study on the Collection Performance of the Bureau of Customs:

Scope and Limitations

Bureau of Customs, Port Area, Manila.

The strength of the Bureau of Customs collection performance is analyzed

according to the chosen macroeconomic indicators as foreign exchange rate,

To analyze the trend of the collection performance, the study uses

secondary type of research wherein the primary concern is to present and

30 years. Furthermore, the study presents a 20 year forecast of the Bureau of

limited only on the data provided by the Philippine Statistics Authority as of

August 31, 2018.

An Analytical Study on the Collection Performance of the Bureau of Customs:

Significance of the Study

performance of the Bureau of Customs and may be beneficial in view of the

Bureau of Customs by revealing the macroeconomic indicators that have least

basis to enhance further the revenue collection of the Bureau;

status of the collection performance of the Bureau of Customs. Output might be

used as reference materials to be kept in the school library of Westmead

International School for research purposes;

In addition, the study is beneficial to BS Customs Administration students

on the collection performance of the Bureau of Customs to broaden their

An Analytical Study on the Collection Performance of the Bureau of Customs:

macroeconomic indicators affect the increased and decreased of the revenue

conceptually and operationally:

Actual Revenue Collection. The term “revenue” refers to income derived

present the profile of the Philippine Bureau of Customs.

An Analytical Study on the Collection Performance of the Bureau of Customs:

Bureau of Customs. The term refers to the Philippine government

agency under the Department of Finance that is mandated by law to collect

subject of the study.

Export. The term refers to goods or services send across national

and level to denote level of imports.

Fiscal Year. The term refers to an accounting year that is essentially a

performance of the Bureau of Customs, i.e., from 1987-2017.

currency stated in terms of another currency; or the conversion rate of one

among the macroeconomic factors deemed affecting the revenue collection