1.

Define – then compare and contrast – line-item budgeting, performance

budgeting, planning programming budgeting system (PPBS), and zero-base
budgeting (ZBB). What are the features, advantages, and disadvantages of
each? Which do you think should be used today? Defend your answer.
Planning, Programming, and Budgeting System (PPBS) is in effect an
integration of a number of techniques in a planning and budgeting process for
identifying, costing and assigning a complexity of resources for establishing
priorities and strategies in a major program and for forecasting costs,
expenditure and achievements within the immediate financial year or over a
longer period.
United States Department of Defense leaders use their Planning, Programming,
and Budgeting System to link operational requirements with financial
obligations. Department of Defense branches typically divides the process into
plans, programs and budgets. While planning, programming, and budgeting
continues throughout the year, PPBS dictates a sequential and an annual
process culminating with annual Defense Plan, followed by a Defense Program,
and then a Defense Budget.
PPBS requires Planners focus on operational requirements, programmers link
the plans to a six-year financial plan (known as a Future Years Defense Plan
(FYDP)), and budgeters prepare a two-year Congressional budget. While each
step contains more detailed financial data, the two-year Congressional budget
stems from the six-year Future Years Defense Plan, which is based on the even
longer term Defense Plan.
Zero-based budgeting (ZBB) is a methodology to help align company spending
with strategic goals. Its approach requires organizations to build their annual
budget from zero each year to verify all components of the annual budget are
cost-effective, relevant, and drive improved savings.
Implemented effectively, ZBB is a cost discipline enabling businesses to
improve resource planning, employee engagement, and organizational
collaboration. Although ZBB is often credited with measures to reduce costs,
its approach doesn’t exclusively focus on savings and can help test
assumptions, solve problems, and ensure spending is aligned to the growth
objectives of the organization. If performance does not meet expectations, ZBB
can empower businesses to identify how to best course-correct for the months
ahead.
Done right, ZBB can translate into cost savings that fund future strategic
initiatives and drive growth.
Budgets are important tools used by corporates and governments to assist
planning for the future. Budgeting provides a basis to compare results with,
evaluate performance and to take corrective actions for the future. The key
difference between zero based budgeting and performance budgeting is that
while zero-based budgeting is carried out by justifying all revenues and costs
for the accounting period, performance budgeting takes into account the inputs
and output per unit with the intention of efficient resource allocation.

2. Discuss the significance of the following government agencies. Bureau of

Internal Revenue (BIR) and Bureau of Customs (BOC). How do these
institutions help the government in terms of putting up the government funds?
The BIR initiated programs to address tax evasion. At the heart of the Bureau’s
enforcement efforts is the Run After Tax Evaders Program (RATE). RATE seeks
to identify and prosecute high profile tax evaders. RATE generates the
maximum deterrent effect by impressing on the public that tax evasion is a
crime and violators will be caught and punished. One of the tools of the RATE
Program is the Reconciliation of Listings for Enforcement System. It enables
corporate taxpayers to send their quarterly sales and purchases data through
the BIR Website. BIR is able to accurately estimate the amount of sales and
VAT liabilities of corporations. The BOC supervises and controls the entrance
and clearance of vessels and aircrafts engaged in foreign commerce. It also
enforces the Tariff and Customs Code of the Philippines and all other laws,
rules and regulations related to Tariff and customs administration. the BOC
and BIR are not sufficient to overhaul the country’s outdated tax system and
raise enough revenues necessary to fund the Duterte administration’s massive
infrastructure program and record investments in human capital and social
protection for the country’s poor and vulnerable sectors.

“The BOC and BIR have started putting in place the necessary reforms to
upgrade tax administration, but these alone will not be sufficient to generate
the high level of revenues needed for the infrastructure buildup and other
priority programs to keep the growth momentum and transform the economy
into a truly inclusive one,” Dominguez said.

Hence, the finance secretary welcomes the recent statement by Rep. Dakila
Carlo Cua that the House ways and means committee, which he chairs, will
likely pass this January the first package of the Comprehensive Tax Reform
Program (CTRP) that the DOF submitted last September for congressional
approval.

Cua said that following his committee’s passage of this first CTRP package this
month, the chamber will likely act on it by mid-2017, which, according to
Dominguez, will put this bill on course on the government target to start
implementing the proposed tax reforms by 2018.

In the BIR, Dominguez said the agency has started expanding its Large
Taxpayers Service to cover the top 3,000 corporations accounting for 75
percent of total tax revenues.

Also, the BIR has started simplifying forms and procedures for small taxpayers
to encourage tax compliance and ease payments, along with improving its
electronic payment systems and enforcing risk-based audits “to make the tax
process more transparent and easier for taxpayers to comply with, Dominguez
said.

“At the same time, we are intensifying the anti-corruption and tax evasion
effort, recruiting 12,000 young people of integrity and competence to fill the
BIR’s large vacancy,” he said.

The BOC, for its part, is now completing the implementing rules and
regulations (IRR) of the Customs Modernization and Tariff Act (CMTA), he said,
to further step up both its anti-corruption and anti-smuggling operations,
while improving the facilitation of trade.

Electronic systems at the BOC are also being upgraded to pave the way for
paperless transactions that will, in turn, reduce opportunities for corruption,
Dominguez said.

“Administrative reforms will be supplemented with more intensive border

patrols and other measures to curb technical smuggling, including the use of
fuel marking,” he said.
As in the BIR, Dominguez said the customs bureau is also eyeing the
recruitment “of about 3,000 young and talented people willing to work in a
corruption-free BOC.”

Dominguez said the approval of the CTRP is crucial to the financial viability of
the Duterte administration’s higher public spending policy because it aims to
correct our tax system’s “inherent flaws, such as non-indexation to inflation of
rates and large scope of exemptions and special treatments that complicates
tax administration” that have for long prevented the BIR and BOC from
consistently meeting, much less surpassing, their annual revenue targets.

“This is why tax policy reforms are needed,” Dominguez said.

Infrastructure spending, according to the National Economic and Development

Authority, should be increased from 5.4 percent of GDP in 2017 to 7 percent of
the GDP in the following years to achieve the country’s vision of reducing
poverty and close to becoming an upper middle-income economy by 2022 and
a high-income one by 2040.

“This means there will be no letup in the Duterte administration’s commitment

to spending on urban and rural infrastructure as a growth driver, to guarantee
sustained high and inclusive growth,” Dominguez said.

Dominguez traced the country’s infrastructure backlog—a deficiency that has

blunted the Philippines’ competitiveness in the region as an investment
destination—to the sad reality that while the Philippine government has been
spending on average just 2.7 percent of our gross domestic product (GDP), our
Southeast Asian peers have devoted at least 5 percent of their respective GDPs
to infrastructure investments.

He said reforms in tax policy, which require congressional approval, will raise
additional revenues of P163 billion in 2018 to help bankroll the government’s
ambitious infra program.
In the medium-term, tax reform is expected to help reduce the poverty rate
from 21.6 percent in 2015 to 14 percent in 2022, lifting some six million
Filipinos out of poverty, and helping the country achieve upper middle-income
country status where per capita gross national income increases from $3,550
in 2015 to at least $4,900 by 2022, close to where Thailand is today.

If this momentum is sustained, the country would be well on its way to

becoming a high-income economy by 2040 with a per capita gross national
income of a least $11,000, which is where Malaysia is right now, he added.

Package One proposes to lower personal income tax rates, broaden the Value
Added Tax (VAT) base, and increase the excise taxes on oil products and
automobiles.

The lowering of personal income tax rates, a promise that President Duterte
made during the 2016 poll campaign, will increase the take-home pay of
workers and make our tax rates more competitive, according to Finance
Undersecretary Karl Kendrick Chua said.

A broader VAT base will level the playing field and reduce massive leakages,
while higher excise taxes on oil products and automobiles will improve the
progressivity of the tax system as richer households consume far more of these
products, he said.

“Meanwhile, to protect the poor and vulnerable sectors, highly targeted

transfers, and subsidies will be provided as part of the ramp-up of social
spending from 37.3 percent of the 2016 budget to 40.1 percent of the 2017
budget,” Chua said.

According to a report quoting BMI Research, sustaining the country’s high

growth path is dependent on the Duterte administration’s ability to roll out big-
ticket infrastructure projects.

Also, the Oxford Business Group has cited a November report of rating agency
Standard & Poor’s that said the Philippines was a top performer in Southeast
Asia in 2016 partly because of an expansionary fiscal policy that emphasizes
public infrastructure.
3. Discuss the budget process in the Philippines. Is it possible that for each
stage of budget process to be subjected to “politization”.

The Philippine Budget Cycle[66]

Four phases comprise the Philippine budget process, specifically: (1) Budget
Preparation; (2) Budget Legislation; (3) Budget Execution; and (4)
Accountability. Each phase is distinctly separate from the others but they
overlap in the implementation of the budget during the budget year.

The budget preparation phase is commenced through the issuance of a Budget

Call by the DBM. The Budget Call contains budget parameters earlier set by
the Development Budget Coordination Committee (DBCC) as well as policy
guidelines and procedures to aid government agencies in the preparation and
submission of their budget proposals. The Budget Call is of two kinds, namely:
(1) a National Budget Call, which is addressed to all agencies, including state
universities and colleges; and (2) a Corporate Budget Call, which is addressed
to all government-owned and -controlled corporations (GOCCs) and
government financial institutions (GFIs).

Following the issuance of the Budget Call, the various departments and
agencies submit their respective Agency Budget Proposals to the DBM.
To boost citizen participation, the current administration has tasked the
various departments and agencies to partner with civil society organizations
and other citizen-stakeholders in the preparation of the Agency Budget
Proposals, which proposals are then presented before a technical panel of the
DBM in scheduled budget hearings wherein the various departments and
agencies are given the opportunity to defend their budget proposals.
DBM bureaus thereafter review the Agency Budget Proposals and come up
with recommendations for the Executive Review Board, comprised by the DBM
Secretary and the DBM’s senior officials. The discussions of the Executive
Review Board cover the prioritization of programs and their corresponding
support vis-à-vis the priority agenda of the National Government, and their
implementation.
The DBM next consolidates the recommended agency budgets into the National
Expenditure Program (NEP) and a Budget of Expenditures and Sources of
Financing (BESF). The NEP and BESF are thereafter presented by the DBM
and the DBCC to the President and the Cabinet for further refinements or
reprioritization.

Once the NEP and the BESF are approved by the President and the Cabinet,
the DBM prepares the budget documents for submission to Congress. The
budget documents consist of: (1) the President’s Budget Message,

through which the President explains the policy framework and budget
priorities; (2) the BESF, mandated by Section 22, Article VII of the
Constitution,[68] which contains the macroeconomic assumptions, public
sector context, breakdown of the expenditures and funding sources for the
fiscal year and the two previous years; and (3) the NEP.

Public or government expenditures are generally classified into two categories,

specifically: (1) capital expenditures or outlays; and (2) current operating
expenditures. Capital expenditures are the expenses whose usefulness lasts for
more than one year, and which add to the assets of the Government, including
investments in the capital of government-owned or controlled corporations and
their subsidiaries.[69] Current operating expenditures are the purchases of
goods and services in current consumption the benefit of which does not
extend beyond the fiscal year.[70] The two components of current expenditures
are those for personal services (PS), and those for maintenance and other
operating expenses (MOOE).
4. Discuss how the senate and the House of Representatives participate in the
process in the budgeting of the country. Include in your discussion the
importance of their participation. With the budget passing through the scrutiny
of both houses, do you think it is wise on the part of the government to include
their participation in the process of working on the national government’s
budget?
The President submits to Congress the National Expenditure
Program (NEP), the Budget of Expenditures and Sources of
Financing (BESF), and the President's Budget Message. The
BESF is the document which reflects the annual budget and the
estimates and sources of financing. The document is presented by
the Executive branch to the Legislative branch.
The proposed budget is first reviewed by the Committee on
Appropriations of the House of Representatives. The Committee
summons the agencies to justify their budgets, with the DBM. to Engage the
Budget Process
assisting and providing technical inputs. The Appropriations
Committee then presents to the House body the proposed budget
and passes it at the Third Reading.
This then goes to the Senate Finance Committee for another round
of hearings and deliberations. The Committee presents the
proposed amendments to the House Budget Bill to the Senate for
approval.
Then a Bicameral Conference Committee, composed of members
of both Houses, is convened to resolve differences. The committee
arrives at a common version, and it is then submitted to the
President. If there are items which he/she disagrees with, then the
President can exercise line-item veto power. The President then
signs it into law as the General Appropriations Act.
The law contains the new appropriations in terms of specific
amounts: for salaries, wages and other personnel benefits; for
maintenance and other operating expenses; for capital outlays, all
authorized to be spent by the government for a given year.
The approved budget becomes effective on the first day of the
budget year concerned, or when it is signed by the President,
whichever comes later.issuance of allotment releases
It is at the budget execution stage that the expenditure program is
implemented. Allotments are issued, chargeable against the
regular agency budgets. It is also at this stage where agencies
may submit requests for availment from SPFs. Agencies are often
required to submit additional reports and documents to support
their requests. Citizen participation in the budget process leads to a
responsive budget allocation, enhances good governance, and improves the
delivery of public services. What are the major processes involved in national
government budgeting? Budgeting for the national government involves four (4)
distinct processes or phases : budget preparation, budget authorization,
budget execution and accountability. Citizen participation is a key element of a
good governance system. It provides private individuals and groups the
opportunity to inform, influence, monitor and evaluate public decisions,
processes, and actions. Participation means the citizens needs to be informed
and organized. This is where the freedom of association and organized civil
society play key roles. Accountability: This is a key requirement of good
governance. Not just for government institutions but also for civil societies and
private sectors. Citizen participation in the budget process leads to a
responsive budget allocation, enhances
good governance, and improves the delivery of public services.
• In the past, despite a vibrant civil society sector in the Philippines, citizen
engagement in the
budget process has been limited due to lack of formal consultation
mechanisms as well as
the overall socio-political environment that constricted the democratic space.
• Since 2010, the Philippines now provides adequate opportunities for citizens
to participate
in the budget process—ranking 5th in the world in the OBS pillar on public
engagement—
because of the following reforms:
- Developed the Principles of Constructive Engagement with CSOs to jumpstart
the process
of creating opportunities for participation in the budget process
- Introduced the Budget Partnership Agreements (BPAs) between agencies and
CSOs, a
formal mechanism for the latter in budget formulation and execution
- Implemented the Bottom-up Budgeting (BuB) to empower citizens in
identifying and
implementing poverty reduction projects with their local government units
- COA introduced the Citizens’ Participatory Audit (CPA), a mechanism by
which CSOs
worked with COA in conducting performance audits in several government
projects
• Moving forward, the government should further deepen and strengthen
citizen participation
the budget by considering the following:
- Institutionalize and expand mechanisms like BPAs, BuB, and CPA that
widened the spaces
for citizen participation in the budget process
- Improve the capacity of agencies to respond to the demands of citizens, e.g.,
providing
information and feedback, and in implementing programs and projects
- Set up participatory mechanisms in the legislation phase of the budget cycle
5. What are the sources of the government funds describe how each source
contributes to the process of putting up the government funds.

The Philippine government generates revenues mainly through personal and

income tax collection, but a small portion of non-tax revenue is also collected
through fees and licenses, privatization proceeds and income from other
government operations and state-owned enterprises.
Tax revenue[edit]
Tax collections comprise the biggest percentage of revenue collected. Its biggest
contributor is the Bureau of Internal Revenue (BIR), followed by the Bureau of
Customs (BOC). Tax effort as a percentage of GDP has averaged at roughly 13%
for the years 2001–2010.[5]
Income taxes[edit]
Income tax is a tax on a person's income, wages, profits arising from property,
practice of profession, conduct of trade or business or any stipulated in the
National Internal Revenue Code of 1997 (NIRC), less any deductions granted.
[6]
Income tax in the Philippines is a progressive tax, as people with higher
incomes pay more than people with lower incomes. Personal income tax rates
vary as such:[7]
E-VAT
The Expanded Value Added Tax (E-VAT), is a form of sales tax that is imposed
on the sale of goods and services and on the import of goods into the
Philippines. It is a consumption tax (those who consume more are taxed more)
and an indirect tax, which can be passed on to the buyer. The current E-VAT
rate is 12% of transactions. Some items which are subject to E-VAT include
petroleum, natural gases, indigenous fuels, coals, medical services, legal
services, electricity, non-basic commodities, clothing, non-food agricultural
products, domestic travel by air and sea.[10]
The E-VAT has exemptions which include basic commodities and socially
sensitive products. Exemptible from the E-VAT are:[11]

Agricultural and marine products in their original state (e.g. vegetables, meat,
fish, fruits, eggs and rice), including those which have undergone preservation
processes (e.g. freezing, drying, salting, broiling, roasting, smoking or
stripping);
Educational services rendered by both public and private educational
institutions;
Books, newspapers and magazines;
Lease of residential houses not exceeding ₱10,000 monthly;
Sale of low-cost house and lot not exceeding ₱2.5 million
Sales of persons and establishments earning not more than ₱1.5 million
annually.
Tariffs and duties
Second to the BIR in terms of revenue collection, the Bureau of Customs (BOC)
imposes tariffs and duties on all items imported into the Philippines. According
to Executive Order 206, returning residents, Overseas Filipino Workers (OFW's)
and former Filipino citizens are exempted from paying duties and tariffs.[12]

Non-tax revenue
Non-tax revenue makes up a small percentage of total government revenue
(roughly less than 20%), and consists of collections of fees and licenses,
privatization proceeds and income from other state enterprises.[13]

The Bureau of the Treasury

The Bureau of the Treasury (BTr) manages the finances of the government, by
attempting to maximize revenue collected and minimize spending. The bulk of
non-tax revenues comes from the BTr's income. Under Executive Order No.449,
the BTr collects revenue by issuing, servicing and redeeming government
securities, and by controlling the Securities Stabilization Fund (which
increases the liquidity and stabilizes the value of government securities[14])
through the purchase and sale of government bills and bonds.[15]
Privatization
Privatization in the Philippines occurred in three waves: The first wave in
1986–1987, the second during 1990 and the third stage, which is presently
taking place.[16] The government's privatization program is handled by the
inter-agency Privatization Council and the Privatization and Management
Office, a sub-branch of the Department of Finance.[17]

PAGCOR
The Philippine Amusement and Gaming Corporation (PAGCOR) is a
government-owned corporation established in 1977 to stop illegal casino
operations. PAGCOR is mandated to regulate and license gambling (particularly
in casinos), generate revenues for the Philippine government through its own
casinos and promote tourism in the country.[18]