Aquino looks into 'real' state of Philippine finances

Posted at 07/01/2010 11:37 AM | Updated as of 07/01/2010 11:37 AM

MANILA, Philippines - President Benigno Aquino and his team spent their first full day in office Thursday inspecting state coffers as a crucial first step in meeting his vow to root out corruption and help the poor.

Already stuck with a record budget deficit, Aquino has accused his predecessor, Gloria Arroyo, of painting an unrealistically rosy picture of the economy to burnish her legacy after nearly 10 years in office.

Aquino has warned massive corruption that infected politics would be rooted out, and in this light his finance secretary promised an unrelenting campaign against tax evaders that could result in prosecutions within days.

Presidential spokesman Edwin Lacierda said Thursday Aquino wanted to be able to report the real situation to parliament during his "State of the Nation" address on July 26, when he will seek funding support for his programmes.

"The president gave his marching orders to each cabinet member. They have two weeks to get to know the lay of the land," Lacierda told AFP.

Aquino, a 50-year-old economist, took office on Wednesday with a vow to lift his nation out of poverty and wipe out crippling corruption that he said thrived under his predecessor.

He also pledged to set up a "Truth Commission" to investigate alleged corruption by Arroyo and her official family.

Lacierda said that over the next few weeks Aquino would fulfil his campaign promise to go after tax cheats and begin implementing programmes specifically targeted at the very poor who comprise a third of the population.

The Philippines posted a budget deficit of P162.1 billion ($3.5 billion) in the first five months of the year, and analysts agree it is unlikely the full-year funding gap would be kept below P300 billion.

Aquino has also ordered a review of all ongoing government programmes and an inventory of all assets to determine which can be sold off to support future projects, Finance Secretary Cesar Purisima told reporters.

The government needs more funds to finance Aquino's pledges to increase spending for education, health and low-income housing.

To underline the government's intent, Purisima said the government would soon start filing charges against tax evaders.

"We are not sure whether we can file some cases next week, but certainly the mandate is to send a very clear signal to the revenue-collecting agencies as well as taxpayers that this administration means business."

Using a basketball analogy, Purisima added: "This will be a full-court press, it will be unrelenting, until we believe we have achieved a tax effort that is commensurate to what our legal system provides for."

Withholding taxes from salaried workers accounted for 90% of all individual income tax collections, suggesting tax evasion was pervasive, he said.

The goal is to slash the budget deficit to bring it down to 2% of the gross domestic product (GDP) within three years, he added.

The Philippines posted a record budget deficit of P298.5 billion last year, equivalent to 3.9% of GDP.

Aquino won a landslide election victory on May 10 on the back of his message of change from corruption and a culture of impunity in which only 18 percent of all criminal cases were resolved.

He also benefited from his status as the son of democracy heroes Benigno and Corazon Aquino, who remain revered for their efforts to overthrow dictator Ferdinand Marcos.