Inauguration of the
Philippine Tax Academy
February 27, 2018
Today, there will be two parts of my talk. First is the speech, and the second is random thoughts on what I think the job of the Department of Finance is. Today, we are taking a great leap forward in professionalizing our revenue agencies. Eight years after R.A. 10143 empowered the Department of Finance to establish such an institution, we are finally launching the very first Philippine Tax Academy (PTA).
The PTA is a specialized training institution. It will make possible continuing professional development of our revenue personnel. And our goal, as Billy Dulay said, is that the graduates here are going to be better than CPAs. This includes not only learning about best revenue practices. It will likewise sharpen the professional commitment of our personnel and raise ethical standards across the board.
In the course of our strategic planning for the PTA, we arrived at this vision statement setting the institution as “a fully functioning and self-sustaining dynamic and innovative center of excellence for capacitating tax and customs administrators, taxpayers and other stakeholders.”
We hope the continuing professional development of our revenue personnel will be based on the highest standards. We expect the curriculum to be state of the art. We will recruit trainers of the best quality.
As a professional training facility, we look forward to collecting information from all over the world, build strong linkages between research and education and ensure complementarity between professional training and professional management. I likewise imagine the PTA will be our facility for developing continuing cooperation with other professional associations, development and funding institutions as well as foreign governments.
This will be a multidimensional educational and research institution. It will play a key role in the culture change we seek to achieve in our revenue agencies. Through the PTA, we could aspire for a cluster of revenue agencies equipped with the best skills available and imbued with the most admirable ethical norms possible.
There is much promise in this institution we inaugurate today. There is much expectation invested in it. I am confident the professional staff we already have will benefit greatly from a culture of constant innovation, ceaseless learning and untiring reinvigoration.
I congratulate the revenue professionals selected to constitute the first batch of trainees of the Philippine Tax Academy. You will be either the Guinea pigs or the vanguards. Either way, you will set the tone for the quality of training that will be offered by this institution. Demand the best and work hard. We want this to be a truly rigorous program.
Let’s do this and let’s do it well. Our country will benefit from having revenue agencies manned by highly motivated and highly skilled men and women.
Thank you, but wait first, I’m not yet finished. I will go to the second part of my speech.
I’ve made myself some notes last night. And since my memory is not so good, I will …
You know, I have been in this job for a little— how many months already? It seems like five years already. I think I’ve been on this job since July, so almost two years. So I finally decided to think, what is really the job of the Department of Finance?
I think the Department of Finance’s main job is to fund the government so the government can perform its functions.
However, there are I think six or seven imperatives in doing that function.
The first one is we must make sure that the economy is growing. First we must make sure the economy is performing at its maximum capacity, and in fact we must increase that capacity of the economy to perform.
For instance, right now we are doing the Build, Build, Build Program. That is to make sure that the economy doesn’t choke from the lack of infrastructure. But that also means that with better infrastructure, our economy will have a higher horsepower rating. So we must increase the capacity of the economy to perform, and it must also perform. And as the economy is growing, it must also grow in an inclusive manner, where no one is left behind. That is the first thing, we must keep the economy growing, we must increase its horsepower capacity, and it must grow in an inclusive fashion.
The second goal is we must have a taxation system that is fair. That’s why we spend a lot of time with Congress to make sure that whatever taxation system we have is fair to everybody. Because if it is not fair, people will not simply pay their tax. So it must be fair, and it must be seen to be fair.
Third, we must have efficient and honest revenue raisers, and those are the BIR, BOC, and the treasurers all over the country.
It is so important that the people have trust in the revenue collectors, that
the revenues they are collecting are fair, and that they are honest and there is no corruption. And I’m sure with our two commissioners leading our two main agencies here, Billy and Sid, they are going to lead from the front, they are going to set the standards, they are going to set the tone of honesty and efficiency.
After we collect it efficiently and honestly, the fourth item is we must make sure that the people know that these investments are not wasted; that they are investments in areas that are good for the society in general. So that is also part of the department’s goal that we must make sure the investments made by the other agencies are economical and good for our society. That’s why we are involved in the DBCC, and that is very important work.
We also must make sure, since we cannot fund our government by ourselves by just collecting taxes, that we are able to borrow money. So when we borrow money we must make sure that our credit rating is the best we can achieve because this determines how much society is going to pay for interest. So that’s also very important: we must show our lenders that we have a responsible fiscal and monetary policy. If we do not have that, our rating is going to go down, and that is going to cost our society. Again, that’s part of the department’s job.
:We must have an excellent Treasury department, and that means to say they must know when to borrow, they must know how to borrow, and they must know what interest rates to pay.
By the way, when you come to this building, you have to know that all the money we collect ends up here, in such computers or bank accounts controlled by the Treasury. But the Treasury department has to be really, really excellent. They have to know, as I said, how to borrow money. It’s a skill. Borrowing money is — if you’re stupid, it’s very easy to borrow money and … to lose. But we have to borrow it — you have to be very clever, your timing has to be very good. And I must congratulate the Treasury because in the last two months they achieve several milestones which are not known by the public, but I’ll mention them.
Number one, we anticipated an increase in interest rates — during the last quarter of last year we anticipated that interest rates will go up. So we decided we would hit the market very hard — in other words, borrow a lot of money — before the interest rates went up. So normally, we borrow P20 billion or P30 billion every Tuesday. This time, we absorbed all the offers to us and fortunately, that was P255 billion. So now as the interest rates go up, we can actually reject high-interest rate bids. So, where is Lea? Lea, congratulations. Lea and her team. Also, in January we borrowed $2 billion, and the ways we measure whether we did a good job or not are two things. Number one, what is the interest rate we pay for tenor months in the US market? We paid three-percent interest rate. So that is pretty good.
Secondly, we measure against how much the US Treasury’s bills yield for that period of time and that tenor. So in 2016, the last borrowing in the same market by the Aquino administration, they paid over one percentage … over the US market. I think 103 basis points. That’s what they call the spread. When we came into the market in January of 2017, we were able to bring that down to a little over half of one percent over the US market. And the spread was I think 67 basis points. This year, Lea and her team were able to achieve one-third of one percent over the US market. So again, congratulations. And by the way, since then, in a month’s time, the US rate has already gone up, I think 20 or 30 basis points. So that’s clever borrowing.
Finally, and this is the seventh item that we should have in doing our job to make sure we can fund the government, is we have to maintain productive relationships with our foreign funders, whether they provide loans, grants, or are from multilateral agencies. We have to maintain a very productive relationship with them.
So those are the seven things that I think are the key result areas of the Department of Finance. If you think of some more, please let me know because I just thought about this last night. And almost two years in the job is not enough to know what else I have to do.
Anyway, thank you very much. Congratulations on being the first batch. I look forward to working with you, and see that we achieve the goals of the Department of Finance and the goals of the Government of the Philippines.
Thank you very much.