Sep 192014
 

http://wikileaks.org/cable/2006/03/06MAILA1222.html#

Reference ID Created Released Classification Origin
06MAILA1222 2006-03-17 10:30 2011-08-30 01:44 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Manila
VZCZCXRO2533
PP RUEHCHI RUEHDT RUEHHM
DE RUEHML #1222/01 0761030
ZNR UUUUU ZZH
P 171030Z MAR 06
FM AMEMBASSY MANILA
TO RUEHC/SECSTATE WASHDC PRIORITY 0045
INFO RUEHZS/ASEAN COLLECTIVE
RUEHGV/USMISSION GENEVA 2152
RUCDOC/USDOC WASHDC
UNCLAS SECTION 01 OF 02 MAILA 001222

SIPDIS

SIPDIS

SENSITIVE

DEPT FOR EAP/TS
STATE PASS TO USTR FOR KBHATIA, RDEHAAN, BWEIEL/DKATZ
USDOC FOR 4430/ITA/MAC/DBISBEE AND SBERLNGUETTE

E.O. 12958: N/A
TAGS: ETRD EAGR ETT EINV KIPR RP
SUBJECT: DEPUTY USTR BHATIA’S EETINGS IN MANILA: FINANCE SECRETARY TEVES, MARC 16

REF: 05 Manila 3778

SENSITIVE BUT UNCLASIFIED – NOT FOR INTERNET
DISTRIBUTION – PROTECT CCORDINGLY

——-
SUMMARY
——-

¶1. (BU) In a March 16 meeting with Deputy USTR
Ambasado Karan Bhatia, Finance Secretary Gary Teveshighlighted fiscal reform measures such as the expnded
value added tax and increased tax revenue collection.
Teves, noting that the Philippines’s GDP growth rate is
lower than other countries in the region, said that the
2.7% deficit-to-GDP ratio must be reduced in order to
encourage rapid economic growth. While tax collection
results were below target in January 2006, February
collections exceeded expectations. Teves reaffirmed the
GRP’s intent to submit its Millennium Challenge Account
Threshold proposal, emphasizing good governance and anti-
corruption, by its self-imposed April 1 deadline. On
Clark tax incentives, Teves described interim solutions
to be implemented until the issue can be permanently
resolved by legislation. Teves also said he is working
to resolve the issue of back taxes on foreign currency
deposits (reftel). End Summary.

————
PARTICIPANTS
————

¶2. (SBU) — USG: Deputy USTR Ambassador Karan Bhatia,
Assistant USTR Barbara Weisel, USTR Special Assistant Bob
Dehaan, Charge d’Affaires Paul Jones, Economic Counselor
Robert Ludan, and Economic Officer Michelle Hoyt.
— GRP: Finance Secretary Gary Teves, Under Secretary
Gaudencio Mendoza, and Under Secretary Gil Beltran.

——————
REVENUE COLLECTION
——————

¶3. (SBU) Ambassador Bhatia congratulated Secretary
Teves on recent fiscal reform measures, including
expanded value-added tax (EVAT), and encouraged him to
find the right balance between deficit reduction and
infrastructure investment. Teves said that the success
of the EVAT has been supported by external factors
including the active role of the media in communicating
developments to the public. He said that if the RP can
“get over the hurdle” of 2006, there will be increased
momentum for continued progress in revenue administration
in the coming years. He cited the need for debt
reduction and referenced the high ratio of deficit-to-
GDP, which was 2.7% at the end of 2005. Teves
acknowledged that the RP, with a 5.1% GDP growth rate in
2005, is behind other countries in the region. He said
that if the debt level decreases, the RP could grow at a
faster rate than it has in the past. Teves said that the
RP needs foreign investment in order to catch up with
regional leaders such as China, India, and Vietnam.

¶4. (SBU) On tax collection, Teves reported that the
Bureau of Internal Revenue (BIR) was 600 million pesos
short of its collection target for January 2006.
However, preliminary reports show over one 1 billion
pesos collected beyond the target in February 2006, which
more than makes up for the slow start.

—————————-
MILLENNIUM CHALLENGE ACCOUNT
—————————-

¶5. (SBU) Bhatia said that he is delighted the RP has
been selected as a Threshold Country and urged the GRP to
more forward quickly to submit its proposal. Teves said
that GRP wanted to meet the self-imposed April 1 deadline
and is anxious to receive feedback on its plan. He noted
that the MCC proposal would emphasize performance goals
for good governance initiatives such as Run After Tax
Evaders (RATE), Run After the Smugglers (RATS), and
lifestyle checks. Teves cited the need for experts to
provide technical assistance on the RATE and RATS

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